ARE BRAINS NEEDED IN ECONOMICS? Cléo Dutertre-Delaunay (LVI

In the simplest sense, economics looks at the choices made by human beings, thus leading one to think that it naturally implicates the human brain. However, to a certain extent, economists have achieved successfully to create models and theories without studying the workings of the human brain.

These models have been good at predicting some market behaviours, such as how supply for specific products will change after a subsidy hike. However, it is not so good at describing more complex phenomena like why people gamble against odds. You might ask how it is possible for some economists to have turned the blind eye, but the answer is quite simple. It is not that they thought economics should completely avoid looking at the brain, it is that economists in the late nineteenth century and much of the twentieth century did not have the technology to do so. As a result, the foundation of economic theory was built on the basis that the functioning of the brain could not be quantitatively measured.

In 1871, William Jevons wrote, “I hesitate to say that men will ever have the means of measuring directly the feelings of the human heart. It is from the quantitative effects of the feelings that we must estimate their comparative amounts.”

The assumption that feelings predict behaviour and can only be measured from behaviour allowed economists to eliminate the step of directly measuring ‘feelings’. It is important to note that although the technology did not exist and many shared Jevons’ pessimistic view, it did not stop economists like Irving Fisher, Frank Ramsey and Friedrich von Hayek from discussing the role of the complex inner workings of the brain, nor did it stop others from suggesting the creation of brain scan equivalents. In 1881, 10 years after Jevon argued that the functioning of the brain would not be known, Francis Edgeworth came up with the idea of a ‘hedonometer’. In theory, it would have measured the utility gained by each individual from their decisions. David Colander, an Economist at Middlebury College in Vermont, stated it was the “equivalent to a neuroeconomics brain scan.”

One might protest that economists have already been taking the brain into account through behavioural economics. It is true that the idea that the brain can inform economics is not new, as for 20 years behavioural economists have argued that psychology should have a greater influence on the development of economic models. What is new is the incorporation of new technology. It is safe to say that Jevons was incorrect, as a result of technological advances in the medical field, it has given us a way to directly measure thoughts and feelings. New impressive tools, such as the functional magnetic resonance imaging more commonly known as ‘fMRI’, have been around since the late 1980s and have just recently been used to study decision-making. The introduction of these machines and research have allowed for the newly emerging field of ‘neuroeconomics’ to exist.

Brain imaging is by far the most used neuroscientific tool; it allows us to see which regions of the brain are activated by different tasks and involves the comparison of the brain performing an ‘experimental’ task and a ‘control’ task. There are three imaging methods: electro-encephalogram (EEG), position emission topography (PET) and of course the ‘good-old’ fMRI. Although neuroscience is sometimes criticised as essentially it just indicates which parts of the brain are working during a specific task, this could allow economists to make the link between how the brain interacts when making different economic decisions. In fact, in a paper researched by Stanford psychologist Brian Knutson and psychiatrist Richard Peterson, it reports that individuals seem to use different parts of their brains when considering and processing financial gains and when they consider financial losses. Neuroeconomics are also optimistic about the impact and influence they may have on public policy. They hope to make models that incorporate information from brain scans to create a mathematical theory of addiction. A theory that would for example allow us to determine the probability that a recovering alcoholic will drink, depending on the location and placement of alcoholic beverages in a supermarket. This could in turn lead to more thoughtful legislations from policy-makers.

Neuroeconomics is a new and exciting field that has the potential to offer the answers to questions that have been debated for centuries, such as: why do we make the choices we make? With technologies improving as we speak, we might get closer to the answer. However, neuroscience leaves us with one question in particular: should we completely rethink the economic theory and start from scratch? But this time economists consider the inner workings of the brain.