Decision-Making and Neuroeconomics

This week’s readings all involve decision-making. In his last chapter, Damasio discusses Descartes’ error and the meaning of the book's title. He states that beings were beings long before humanity emerged; therefore an organism must first exist and “be” before it can think. As Damasio says, “We are, and then we think, and we think only inasmuch as we are, since thinking is indeed caused by structures and operations of being,” (248). Furthermore, the body and the mind, emotion and reason, are not necessarily separate entities and are integrated processes. Thus, in decision-making, the body and the mind, from emotion to reason, to neural/cell biology, are all interconnected.
Damasio discusses the differences in decision-making in frontal-lobe damage individuals, brain damage patients with lesions other than the frontal lobe, and “normals”.‘Normals’ and patients with brain damage that did not affect the frontal lobe, demonstrated high skin conductance responses to the high-arousal slides, whereas frontal lobe patients showed no skin conductance responses. When asked to debrief, frontal lobe patients had the ability to articulate the high-emotional content of the picture and when the picture was shown. In other words, they knew that the “in spite of realizing their content ought to be disturbing, he himself was not disturbed…the patients could evoke factual knowledge internally but could not produce a somatic state” (211). They knew how they were supposed to feel, but could not feel the appropriate reaction.
The next way that they tested the somatic-marker hypothesis were through gambling experiments, in which they tested frontal lobe patients and ‘normals’ in decision-making drills with real-life uncertainty and circumstances. The objective of the experiment was to lose as little as possible and gain as much as possible. Inherit human biases we have are preference of reward over punishment, gain over loss, and low-risk over high-risk. All ‘normal’ patients were generally picked from decks C and D after ‘learning’ that A and B were risky. Despite smaller gains, these players assumed that Decks C and D would reap higher benefits in the long run. In the cases of Elliot, even though they considered themselves ‘low-risk’, they were bankrupt midway through the game, thus demonstrating the biases and inaccuracy of verbal accounts. Although there was concrete evidence that decks A and B were ‘dangerous,’ and ‘disadvantageous,’ frontal-lobe damage patients continuously became bankrupt because they were insensitive to the long-term affects and acted out of immediate gratification. While ‘normals’ sought out patterns to predict a bad outcome, the neural underpinnings that determined what was wise to avoid/prefer were malfunctioning in frontal lobe patients. ‘Normals’ “place a disappropriate weight on losses relative to gains of similar absolute value,” (Neuroeconomics, 112).
A field called Neuroeconomics has emerged in recent years, combining psychological, neurological and economic studies to more accurately and predictably determine how people make and value choices and decisions. In attempting to understand human (consumer) behavior, economists and neuroscientists alike have assessed that “behavior can be interpreted as choosing alternatives with the goal of maximizing utility,” (Neuroeconomics, 108).
Numerous hormones, neurotransmitters and brain areas are involved in decision-making.The ACC not only responds to positive rewards, but to negative rewards and utility as well, taking into account errors, negative response, pain and penalty. In making decisions, neural systems involved are sensitive to relative gains and loses. Frontal lobe patients, however, are not sensitive to these relative gains and loses.
In Demasio’s experiments, frontal lobe patients were unable to make advantageous decisions for the future because of a lack of working memory and attention and a neural inability to determine a pattern of losses vs. gains. Out of myopia for the future, these patients acted for the ‘now’ rather than the future. Frontal lobe patients did not have the basic skill of planning for future prospects rather than immediate gains. This may be a result of poor working memory or attention, or somatic-markers, whereby future scenarios are not taken into consideration. With failure of the somatic-marker, it is impossible to develop ‘theory-of-mind’ or other such processes important in guiding for the future. How they acted in this game was in direct proportion to how they acted in real life, and their inability to plan ahead.
Dopamine also plays a large role in reward. It “plays a crucial role in value assessment by signaling errors in reward prediction, which are used to augment reward-producing behaviors both by generating learning signals and by adaptively updating goal states and attentional focus in working memory,” (Neuroeconomics, 110).
In the Ultimatum Game, individuals were asked to either accept or reject a sum of money from another player. In typical economic models, individuals would have taken money every time in the Ultimatum Game, since humans prefer inherently rewards. However, half of the unfair offers were rejected. In unfair offers, the dlPFC and the anterior insula lit up when participants were faced with an unfair offer. These areas are associated with deliberative and emotional processes, “if the insular activation was greater than the dlPFC activation, participants tended to reject the offer, if the dlPFC activation was greater, they tended to accept the offer.” Unfair choices elicited disgust and pain. Participants tended to act with trust and under the ‘norm’. These actions were chosen because they elicit social rewards when acted out in the real world. The dlPFC is also involved in “perceptual evidence for decision-making,” (Rorie & Newsome, 42). Sensory evidence is more active when the pictures were clearer and the task easier. Likewise, attention is more required in the more difficult tasks. Like Damasio points out, visual representations and attention are crucial in decision making.
As Grimes and all of the readings commonly state, our brains, evolutionarily, have been made to suit co-habitation with others. He says, while we may have “Machiavellian interests,” we benefit by our biological urges to be cooperative and trustful. Social interactions, love, sex, and many other things trigger the production of oxytocin, a necessary hormone that acts through the parasympathetic nervous system. This hormone goes through parts of the brain associated with memory, the limbic system, prefrontal cortex, memory and decision-making sections. Oxytocin, amongst many other things, has a large role in trustworthiness. Trusting is socially advantageous. Thus, the economic viewpoint that assumes we are only interested in maximizing personal gains is not advantageous. Zak suggests that social cooperation is a ‘primitive’ impulse, whereas greed is only evident in more newly-evolved brain parts. Cooperation involves sophisticated processes such as ‘theory of mind,’ ‘delayed gratification’ ‘attention,’ that frontal lobe patients often lack. Trust, however, does not just entail controlled responses, but involves emotional response. In any case, those who opted to trust usually came out better in the long run.
As Lehrer assesses, “In the real world, losing out in the short term could mean getting a social benefit in the long term,” (502). Although there are specific brain areas involved in mechanism for decision-making, all the readings suggest that there is no one single brain area that determines decision-making. Instead, there are multiple neural processes involved in decision-making. Reward-based decisions are complex, usually come in different modalities, and are time-dependant. When thinking about a future reward, McClure states, brain areas associated with rationality are activated, whereas when it is an immediate reward, emotional circuits become activated. Activity in the brain was directly reflective of what the participants chose.
Damasio and Sanfey and co. say, controlled and automatic processes are not two distinct processes, but rather are a continuum. Although automatic processes jump in to make decision at first, controlled processes then mitigate it when the consequences of using solely the automatic processes becomes too large. Though these systems cooperate, they, at times, compete and do have distinguishable brain lateralization. Just as Damasio states, Sanfey says, automatic/emotional processes are usually hard-wired and involve evolutionarily ‘older’ parts of the brain (posterior cortical structures & subcortical systems, limbic system), whereas controlled processes involve ‘newer’ parts of the brain (anterior and dorsolateral regions of prefrontal cortex and posterior parietal cortex), and are flexible and do not rely on specific mechanisms. Those with frontal lobe damage often lack the basic planning skills because areas involved with higher thinking, problem-solving and planning are localized in the ‘controlled’ processes systems, thereby allowing the ‘automatic’ system take over each time.
Economists have now attempted to integrate the dual-process model. However, Camerer (from Lehrer’s article) says that it remains controversial: too dichotomizing for neuroscientists and too complicated for economists. Neuroeconomics however attempts to bridge the gap. More often than not, Lehrer says, new do not make decisions advantageous to our future, which is why “US consumers currently have a savings rate close to zero…” arguing that, “understanding how we make such decisions will help us develop better economic policies,” (504).
The fact is, economics and marketing do not have our savings rates in mind. In fact, their goal is to bankrupt us and to make us dependant on loans and buy more products. It is advantageous to marketers for consumers to put the future on the backburner and to bank on the present. In an ideal society for the marketer, we would all be Elliots, without the ability to plan for the future. If we always thought about our retirement or savings, brand names would go bankrupt. Labels are ingrained in our minds and influence our every day decisions, as is evident in the Pepsi-taste test, where brand always trumped taste. When drinking a cola with a Coke label, the hippocampus and the midbrain were lit up, just like when we see other brands.
The field of neuromarketing, more so than looking out for our best interest, will use psychological/neurological studies in order to better understand how to manipulate our decisions and enable us to buy their products more predictably. Advertisers are now banking on fMRI scans (rather than outdated methods of verbal accounts) to determine consumer choice and behavior, as in FKF with the Super bowl ads. For an advertisement to be successful, reward sections of the brain must be activated. The merging of these fields is very exciting, but highly manipulative.