Tuesday, April 3, 2007

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.

Monday, April 2, 2007

neuroeconomics and decision-making

The readings for this past week highlighted the theory of neuroeconomics and how it relates to emotions and reasoning. Jonah Lehrer discusses how neuroeconomics uses the experimental techniques of neuroscience to make economic decisions. Lehrer says that neuroscientists are looking to understand the immediate causes of economic choices by looking at how the brain makes the economic decisions. This leads to the reasoning aspect of decision-making and how emotions play a role. Humanity is constantly throwing a crimp in neuroeconomic reasoning because of our ability to trust and to approach the future in such irrational ways. Ken Grimes goes into detail about how the Nash equilibrium theory is bunk when adding the neurological act of trust into the theory. The Nash equilibrium discusses how when two strangers are making economic transactions between one another they will not trust each other at all. On the contrary, people consciously choose to be cooperative and trusting when negotiating economically.
Grimes claims that this has something to do with the “trust chemical” in the brain: oxytocin. Whereas some chemicals released into the brain enact “fight or flight” or “rest and digest” reactions, oxytocin is known to release “lust and trust” feelings into the brain. Grimes wants to find a way to build a national utopia through universal acts of releasing oxytocin. That way we can all trust each other and coexist with more harmony. Is this a rational idea within itself or is this humanities irrationality of the future at play? Damasio discusses how there is passion for a reason and having these extreme emotional opinions is part of our reasoning. Is this what Grimes is doing when saying that he wants a utopia of trust?
Damasio explains the title to his book, Descartes’ Error and talks about Descartes separation of the mind and body is what makes his claim, “I think therefore I am.” incorrect. Descartes’ idea of consciousness and reasoning ignores the abstract approach that the mind has. He does not wish to discuss the lucid concepts that emotions and feeling present so he separates the body and the mind so that he can prove his theory to be true. Is Damasio going so far as to say that the phrase should be, “I feel therefore I am.”? I don’t know. I don’t know if that’s possible. I think that Damasio wants a synthesis of thinking and feeling to occur so that we can claim existence. We exist because we think and we feel. We are overcome with passion for a reason and that is part of our complexity and fascination, to Damasio.
So, how does neuroeconomics help us to understand the emotional aspect of economic negotiations? It is hard for me to come to a well-developed conclusion because it was hard for me to relate the gambling experiments to real-life situations outside the gambling context. When you add a component to a situation like money, there will be rewards and penalties. So, if there is frontal lobe damage, can one not understand the difference between when they are rewarded and when they are penalized? Does this happen when there is no neuroeconomic aspect to the experiment? Why was economics the choice of study for neuroscientists? How has it been more helpful than other areas? How could Damasio better incorporate neuroeconomics into his studies other than through the gambling experiments?

Sunday, April 1, 2007

Neuroeconomics and Decision-Making

Jake Szczypek
Reading Response #3
4/1/07
Neuroeconomics and Decision-Making

This week’s readings focused on the field of neuroeconomics and how it uses both psychological and economical methodologies in order to learn more about the human brain in relation to decision-making. After having read about the somatic marker hypothesis in Damasio (1994), the additional articles were quite fascinating to me, as I have no experience in economics. What I found most interesting, however, was the discussion over emotional and cognitive processes and how they each play a major role in decision-making.
According to Bechara, et al.’s The Iowa Gambling Task and The Somatic Marker Hypothesis (2005), the Iowa Gambling Task (IGT) uses skin conductance responses (SCRs) to test for “emotion-related marker signals” released through the sweat glands (pp.160). Damasio (1994) also uses SCRs in his experiments with Elliot, and both of these readings come to a similar conclusion regarding emotions and their effects on decision-making. In the IGT, individuals with damage to their ventromedial prefrontal cortex (VMPC) were unable to generate SCRs prior to having conscious knowledge of the IGT. Accordingly, they continued to choose the “bad deck” once they obtained conscious knowledge of the task at hand because of, what appears to be, a lack of emotion processes from the VMPC. Normal participants, however, generated SCRs before having conscious knowledge of the situation and thus demonstrated a preference for the “good decks” early on. Having a functional VMPC, which generated emotional responses to both decks, allows for more advantageous decision-making. These results indicate that cognitive assessment is not the only factor playing a role in our choices. It would appear that emotions play a role in informing our decision-making process in ways that don’t seem to agree with cognitive rationale. Lehrer’s Driven to Market (2006) goes even further to state that there are two processes involved in decision-making: one being a cognitive process and one being an emotion process. However, while economists seem to view this as a productive description of the decision-making process, psychologists tend to disagree. The influence of emotions on rationality is a much more integrated process that can’t be split into a simple “dual-process model” (Lehrer, 2006, pp.503).
As much as I want to agree with the dual-process model, I also believe that it’s much more complicated than two separate systems “fighting” for control. The dual-process model seems like a great way of looking at decision-making, but according to Grimes’ To Trust is Human (2003), the hormone oxytocin has been shown to release “as a response to the social signal of trust” (pp.2). And since oxytocin receptors are located in the hypothalamus and the limbic system (both connecting to areas in the brain involved in memory) the decision to trust another person cannot simply be an “argument” between cognition and emotion. Multiple areas of the brain are activated, weighing memories, rationality, and emotions. It can’t be this dichotomous dual-process some are suggesting, can it? And why do emotions always have to be considered irrational, as if cognition is the antithesis of emotion? Clearly that’s not always the case.
There seems to be evidence in this literature that supports the dual-process, but there also seems to be great uncertainty over whether or not it’s true. For example, Sanfey, et al.’s Neuroeconomics: Cross Currents in Research on Decision-Making (2006) shows convincing neural evidence that there is a dual-process for decision-making (although they describe it as controlled and automatic processes). According to their study with the Ultimatum Game, there are two major brain regions that appear to be active when a participant receives an unfair offer. Participants that rejected the offer showed higher activity in the anterior insula than in the dorsolateral prefrontal cortex (dlPFC). Participants that accepted the offer, however, demonstrated higher activity in the dorsolateral prefrontal cortex than in the anterior insula. It would seem that the area of the brain associated with deliberative processing (being the dlPFC) is more active when participants are “rational” in their decision-making, while the area of the brain associated with emotional processing (being the anterior insula) is more active when participants are “emotional.” So, what does this mean?
Emotional processing is what makes humanity so interesting to me. We’re not rational robots, we’re driven by more than rational thought and that’s also what seems to make us social beings, according Lehrer (2006) and Grimes (2003).

Decision Making

This weeks readings focused on the processes of reason and emotion in decision-making. In both The Iowa Gambling task and the Somatic Marker Hypothesis and in chapter ten of Descartes’ Error, Damasio discusses two key experiments used to identify biological reactions in relation to emotion and decision-making. The somatic marker hypothesis tests the use of the autonomic nervous system, which consists of an outgoing network of motor commands and an incoming network that signals changes in the viscera. A somatic marker identifies essential changes of body state that are triggered by neural and chemical indicators in the viscera and musculoskeletal systems. When feeling particular emotions the autonomic nervous system generates a secretion of fluid in the skin’s sweat glands. By conducting skin conductive response experiments on people like Elliot with damage to their frontal lobe brain area juxtaposed with normal people, interesting results arose. While the normal participants had skin responses after viewing emotion-provoking slides, the subjects with frontal lobe damage showed no signs of skin reaction. The brain damaged participants could describe in words the horror (or whatever emotion) of the slides but were unable to actually feel what they were talking about even if they were aware of their lack of emotion, which demonstrates Damasio’s first point: to know is not to feel. The lack of something in these patients’ frontal lobe area somehow turned these people into robots.
The second experiment that is discussed is the gambling experiment. This test played with the ideas of reward and punishment in a fun gambling game that possibly activated more ‘real-life’ decision-making, since it wasn’t a typical testing environment. This experiment showed that people with brain damage to their frontal lobe made bad decisions because they were too concerned with the present instead of the future. In a third experiment that combined the skin response tests with the gambling experiments both brain damaged and normal participants showed immediate signs of skin responses. The difference was that the normal subjects continued to show signs of skin response that reflected their increasing learned knowledge to be able to predict bad or good card outcomes to make good decisions, while the brain damaged subjects did not learn from their mistakes even though they were aware of what was going on in the game.
On a slightly different note, I think something that Sanfey, Loewenstein, McClure, and Cohen state in their article Neuroeconomics: cross-currents in research on decision-making is very important to remember: “One current challenge is to ensure that researchers are communicating productively; often, terms such as ‘choice,’ ‘judgement,’ and ‘decision’ are used in different ways by different fields” (114). This also applies to the words ‘reason’ and ‘emotion.’ I felt almost offended by Jonah Lehrer’s use of these words in his article Driven to Market, although I realize a lot of people use it in the same way (it seemed like he was blaming emotions instead of money). I think it is important consider different definitions of both words: why is emotion always considered irrational? Is that true? Is it not rational to follow your instincts? Why does society try to repress emotions (it almost seems like socirty wants to damage our frontal lobes so we can't feel emotion...but of course that would only result in chaos...)? How is reason related to the ability to consider the future? How is it related to the ability to consider the present? Maybe there is more than one kind of reason, like Damasio presents in the first three chapters of Descartes’ Error. Damasio also suggests a very important idea—maybe reason and emotions are not completely separate. We need to find a balance between immediate emotion (reason 1) and future planning (reason 2). I think it is important to remember Damasio’s understanding that ‘feelings are a powerful influence on reason, that the brain systems required by the former are enmeshed in those needed by the latter, and the such specific systems are interwoven with those which regulate the body’ (245).