(2003). Decisions, Uncertainty, and the Brain: The Science of Neuroeconomics. Journal of Clinical and Experimental Neuropsychology: Vol. 25, No. 7, pp. 1035-1037.

Decisions, Uncertainty, and the Brain: The Science of Neuroeconomics

Many economists are libertarians and consider the term “paternalistic” to be derogatory. Most would think that the phrase libertarian paternalism is an oxymoron. The modest goal of this essay is to encourage economists to rethink their views on paternalism. We believe that the anti-paternalistic fervor expressed by many economists is based on a combination of a false assumption and at least two misconceptions. The false assumption is that people always (usually?) make choices that are in their best interest. This claim is either tautological, and therefore uninteresting, or testable. We claim that it is testable and false—indeed, obviously false. The first misconception is that there are viable alternatives to paternalism. In many situations, some organization or agent must make a choice that will affect the choices of some other people. The point applies to both private and public actors. Consider the problem facing the director of a company cafeteria who discovers that the order in which food is arranged influences the choices people make. To simplify, consider three alternative strategies: (1) she could make choices that she thinks would make the customers best off; (2) she could make choices at random; or (3) she could maliciously choose those items that she thinks would make the customers as obese as possible. Option 1 appears to be paternalistic, which it is, but would anyone advocate options 2 or 3? The second misconception is that paternalism always involves coercion. As the cafeteria example illustrates, the choice of which order to present food items does not coerce anyone to do anything, yet one might prefer some orders to others on paternalistic grounds. Would many object to putting the fruit before the desserts at an elementary school cafeteria if the outcome were to increase the consumption ratio of apples to Twinkies? Is this question fundamentally different if the customers are adults? If no coercion is involved, we think that some types of paternalism should be acceptable to even the most ardent libertarian. We call such actions libertarian paternalism. In our understanding, a policy counts as “paternalistic” if it is selected with the goal of influencing the choices of affected parties in a way that will make those parties better off. We intend “better off” to be measured as objectively as possible, and we clearly do not always equate revealed preference with welfare. That is, we emphasize the possibility that in some cases individuals make inferior choices, choices that they would change if they had complete information, unlimited cognitive abilities, and no lack of willpower. Once it is understood that some organizational decisions are inevitable, that a form of paternalism cannot be avoided, and that the alternatives to paternalism (such as choosing options to make people sick, obese, or generally worse off) are unattractive, we can abandon the less interesting question of whether to be paternalistic or not and turn to the more constructive question of how to choose among paternalistic options. 1 † Discussants: Robert E. Hall, Stanford University; Gary Becker, University of Chicago; Robert Barro, Harvard University.

Behavioral Economics, Public Policy, and Paternalism

“Humanity 2.0” refers to the title of my recent book (Humanity 2.0: What It Means to Be Human Past, Present and Future, Palgrave Macmillan, 2011), in which I present humanity as historically poised to re-negotiate its sense of collective identity. There are at least five reasons for this, which are addressed in this paper: (a) the prominence of digital technology in shaping everyday life and human self-understanding; (b) the advances (both promised and realized) in biotechnology that aim to extend the human condition, perhaps even into a phase that might be called “trans-” or “post-” human; (c) a growing sense of ecological consciousness (much of it promoted by a sense of impending global catastrophe); (d) a growing awareness of the biological similarity between humans and other animals, reviving doubts about strictly naturalistic criteria for demarcating the “human”; and (e) an increasing sense of human affection and sympathy migrating to animals and even androids, during a period when national health bu...

/pdf/the-emerging-political-economy-of-humanity-2-0-1wvnq4g2ah.pdf

The emerging political economy of Humanity 2.0

This paper examines the adequacy of an evolutionary-oriented notion of rationality—ecological rationality—that has recently been proposed in economics. Ecological rationality is concerned with what it is rational to do, and in this sense is a version of what philosophers call ‘practical rationality’. Indeed, the question of the adequacy of ecological rationality as it is understood in the paper, is the question of whether ecological rationality is a genuine notion of practical rationality. The paper first explicates and motivates the notion of ecological rationality by (a) explicating the notion of practical rationality, (b) grounding ecological rationality in an evolutionary approach to the emotions which is mainly illustrated by the example of fear, and (c) outlining the reasons adduced in economics for generalizing ecological rationality beyond the emotions. The paper then argues that (d) the raison d’etre of practical rationality is first and foremost a specific role it plays in the explanation of behavior, or in telling why it has occurred. Finally, based on (a)–(d), the paper argues that (e) ecological rationality lacks a constitutive feature of practical rationality—namely, normativity—which is related to the latter’s basic explanatory role, and thus cannot be considered a genuine notion of practical rationality. While the paper focuses on the economic version of ecological rationality, its conclusions apply just as well to other, related, versions of the ecological notion that have been proposed in biology and evolutionary psychology.

Emotion, utility maximization, and ecological rationality

In modern society, acute stress has become one of the main risk factors affecting human mental health and quality of life. Stress not only has a profound impact on the brain and cognition, but also affects human prosocial behaviors and social interactions. Acute stress has been implicated in modulating various social behaviors, including trust and empathy. However, it remains unclear how stress influences the third-party altruistic decision, especially in the face of conflicts between altruistic decisions and self-interest. When facing with a violation of justice, people show high probability of self-sacrifice to restore justice, but the optimal decision of the impact of stress on social decision-making in different circumstances is unclear. To address this question, we used a third-party intervention paradigm to assess participants’ choice preferences after exposure to physical stress. In the third-party intervention task, participants could transfer MUs from their endowment to punish a norm violator or help the victim, and they could also leave the MUs to themselves. After the decision-making task was completed, participants were also asked to complete an analogous scenario task, including two crime scenarios: A robbery scenario and a traffic accident scenario. They were asked to put themselves in these situations and make calls as soon as possible based on priority, that is, call 110, the police, (i.e., punish offenders); call 120, the First Aid Center, (i.e., help victims); and call for themselves (i.e., defend their own interests). First, we found that selfish choices focused on the condition of fair offers. Second, compared with the moderate unfair condition, the serious unfair condition increased punishment and help behavior. Additionally, for the trade-off between the two prosocial choices under the condition of moderate unfairness, the participants in the stress group tended to increase the punishment behavior and reduce the help behavior, when compared with the control group. We also found that the increase of punishment behavior was not only reflected in the choice preference, but also in the intensity of punishment. The participants in the stress group punished more, consistent with the “fight or flight” pattern, which is considered to be the typical human response to stress. However, under the serious unfairness condition, there was no significant difference between the stress group and the non-stress group. In the scenario task, although there was no significant difference between the two groups in the three options, the stress group evaluated the accident scene to be more serious. These findings suggest that when the third-party helping and punishment as an optional prosocial behavior, stressed individuals are accustomed to choosing punishment behavior. This study provides evidence and explanations for studying the effects of stress on prosocial behavior.

/pdf/punishing-or-helping-the-influence-of-acute-stress-onthird-rso74orcqz.pdf

Punishing or helping: The influence of acute stress onthird-party decision-making

L’escompte hyperbolique ou myopie decisionnelle a ete correlee a des problemes de croissance dans differentes regions du globe (Mullainathan 2005), le changement climatique (Dasgupta 2008), la faiblesse de l’epargne (Thaler et Benartzi 2004), et d’autres problemes economiques. Nous developpons l’hypothese selon laquelle une meilleure comprehension des bases psychologiques et biologiques de l’incoherence des choix intertemporels permettra de mieux evaluer la pertinence et l’efficacite des politiques publiques visant a contrecarrer les effets de ces anomalies comportementales individuelles au niveau agreges. La neurobiologie des choix intertemporels peut aider les approches dites « paternalistes douces » a selectionner finement les environnements institutionnels qui, sans entamer l’autonomie des choix individuels, contribueraient a les rendre generalement plus optimaux. L’approche neuroscientifique du choix intertemporel contribue a l’ecologie des systemes sociaux futurs dans la mesure ou elle permet de confirmer certaines hypotheses evolutionnaires sur la selection des comportements d’escompte hyperbolique. A travers ce type de confirmation, cette approche permet de deplacer l’idee paternaliste traditionnelle d’une adaptation des individus a des cadres institutionnels incorporant certains principes normatifs de rationalite, en faveur d’un paternalisme doux (ou d’un non-paternalisme tout court) qui cherche a adapter les environnements institutionnels a la realite biologique des individus.

/pdf/the-biological-basis-of-intertemporal-choice-and-the-design-4bm3px7lsf.pdf

The biological basis of intertemporal choice and the design of debiasing institutions

We offer an integrative views of the neurobiological and genetic studies of intertemporal choice behavior in connnection with its several modelling (exponential, hyperbolic and quasi-hyperbolic).

/pdf/from-neuroeconomics-to-genetics-the-intertemporal-choices-smkfsfxstn.pdf

From Neuroeconomics to Genetics: The Intertemporal Choices Case as an Example

Aversion a la trahison ou aversion au regret ?Les echanges economiques et sociaux se produisent souvent entre des personnes etrangeres les unes aux autres et qui ne peuvent donc pas se reposer sur une histoire commune ou sur la perspective de futures interactions dans le but d’etablir une confiance mutuelle. Les theoriciens des jeux formalisent ce probleme en termes de « jeux en un coup » (une seule periode) - comme peut l’etre le « jeu de la confiance » - et predisent que la non-cooperation est l’equilibre theorique de ce jeu dans la mesure ou le premier joueur, ne pouvant attendre que le second joueur retribue de maniere reciproque la confiance qu’il aurait mise en lui, est contraint a ne pas investir. Bohnet et Zeckhauser (2004) proposent que, du fait d’une aversion a la trahison, les individus preferent eviter des situations dans lesquelles ils pourraient etre trahis. Nous developpons l’argument selon lequel l’emergence d’un tel comportement peut etre egalement due a une forme d’aversion au regret.Classification JEL : A12, A13, D81.

Is it Betrayal Aversion or Regret Aversion

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The biological basis of intertemporal choice and the design of debiasing institutions

From Neuroeconomics to Genetics: The Intertemporal Choices Case as an Example

Is it Betrayal Aversion or Regret Aversion