Our behaviour and decision-making are concepts scientists have tried to explain in many ways. Ultimately, every decision we make can be reduced to a single aspect, namely the interaction of millions of neurons within the human brain. Our economic behaviour is no exception. And that’s precisely what makes neuroeconomics such a fascinating area of research. Dr Jan Engelmann is a researcher and lecturer in neuroeconomics at UvA’s Amsterdam School of Economics (ASE) and is pleased to tell us more about this nascent field of study.
Of the whole network of organs that make up the human body, the brain is one of the few areas where our ignorance exceeds our knowledge. This fact underscores the potential of research fields such as neuroeconomics, a domain where various scientific disciplines come together. Not just to explain but also to predict human behaviour and decision-making.
To some degree, prediction is already possible, according to Dr. Jan Engelmann. ‘In the past 20 years, we’ve made gigantic strides. For instance, we are now able to use data from our scanner to train an algorithm that we use to predict human behaviour.’ This methodology uses algorithms that are very similar to those that support artificial intelligence. Engelmann: ‘But still there are many limitations to this method, as this approach works best when the behaviour takes place in close approximation ‒ no more than a couple of seconds to minutes after the brain scans were gathered. It doesn’t give us any long-term predictions yet.’ In the short term, however, related techniques already can have considerable impact. ‘For instance, it gives insight into how we can nudge people to go to the gym or stop smoking.’
Our brain restricts our ability to make optimal decisions in many situations. With the help of neuroeconomics, we’re getting an increasingly complete picture of those biases and how they arise.
Trust is a lubricant within our economic system. As customers, we trust that the products and services we order will indeed be delivered. As producers and suppliers, we trust that we will get paid. Engelmann: ‘If somebody breaks this trust, we immediately have an unworkable situation and our economic system can grind to a halt.’
When we look at reality through traditional economic spectacles, we are quick to draw conclusions that are not in sync with how present-day society actually works. ‘According to standard economic theory, human beings are purely rational, self-interested, unchanging and in pursuit of maximizing their own utility.’ But this is far removed from reality as the many heart-warming initiatives during the corona pandemic have shown. ‘People, in general, are not just focused on themselves: most prefer to create a situation where all those involved benefit.’ Neuroeconomics has been deployed to demonstrate that the assumptions of standard economic theory are often wrong. Not by claiming that the world consists only of altruists but by conducting research into the biases affecting our decision-making and demonstrating how these biases are represented in the brain.
As Engelmann points out: “Our brain restricts our ability to make optimal decisions in many situations. With the help of neuroeconomics, we’re getting an increasingly complete picture of those biases and how they arise. It is for instance becoming clearer that our decisions are strongly influenced by emotions.’
A recent study co-authored by Engelmann shows that negative emotions have far-ranging effects on our decisions. It demonstrates that negative emotions, such as the fear of an electric shock, suppress the activity and connectivity of the ‘trust’ network in our brain. This network usually helps us understand social situations and enables us to put ourselves in someone else’s shoes. Engelmann refers to these social skills as ‘theory of mind’, an important concept from psychology and social neuroscience that refers to our ability to understand other’s mental states and emotions.
Such insights from psychology, together with economic games and neuroscientific tools, constitute some of the building blocks of neuroeconomics. ‘They are the basic tools we use to examine social decision-making. And the results tell us a lot about trust. Not only between 2 people, but also in a broader sense, such as between people and organisations. This is more relevant than ever during the current pandemic. Do we, for instance, trust organisations enough to allow an mRNA vaccine to be injected into our bodies when we’d barely heard of it until recently? Do we trust our fellow citizens to stay at home when they’re not feeling well?
Altogether, research into trust and how trust is represented in the brain, is more relevant than ever before. ‘In the last decade alone, we have learned so much about our brain and how the complex interactions between networks of neurons are related to behaviour. Whether you are interested in human behaviour from a psychological, economic, sociological, or biological perspective, the role of the brain within these disciplines is difficult to overestimate.’