Risky Business
The brain responds to different levels of economic uncertainty by activating different sets of brain modules. That’s the finding of research by Caltech economics professor Colin Camerer and his colleagues. (http://www.sciencedaily.com/releases/2006/01/060111082311.htm)
Two conditions were used: risk and uncertainty. In both cases, Caltech students played a game in which they chose between a sure thing (say, $3) or drawing a card that could either win them $10 or nothing. They played the game while being scanned by fMRI, so that the researchers could see what brain areas were being activated.
In the risk condition, the students were told that half the cards were red (worth $10) and half were blue (worth nothing). In the uncertainty condition, the students were told nothing about the odds of winning on a trial.
These conditions represent familiar models in game theory, economics and statistics. The risk condition is not risky at all, at least not to anyone who understands gambling. The statistician story: You win $5 on half the trials. On average, 24 trials (the number used in the experiment) will get you $120 if you draw a card every time. If you take the $3 on every trial, you will have $72 at the end of the game. You are quite certain about the best strategy.
In the uncertainty condition, the students did not know the odds and so could not (as easily) determine the best strategy.
Brain findings: In the risk case, the dorsal striatum tends to light up. In the uncertainty case, the more emotional parts of the brain known as the amygdala and orbitofrontal cortex (OFC) are involved.
Camerer’s interpretation: the OFC and amygdala presumably work together when a person is confronted with a bet on unknown odds. The amygdala sends a "caution" message and the OFC processes the message. Under such circumstances, students become more cautions. In this case, they drew fewer cards. The increased caution cost them money.
----------------
Selby's comments: “The increased caution cost them money.” This is the kind of finding that economists are fond of citing as evidence that people do not always make good economic decisions (and would do better if they got advice from economists). But it is only the experimenter, with a God’s eye view of the situation, who can know the correct strategy. If there had been only five winning cards in the deck of 20, the average pay-off per draw would have been $2.50 and the cautious strategy would have saved them money.
Still, the results are important in showing how the brain changes its modules according to the demands of the situation. They are also useful in raising the question of whether there is a less emotional way and/or more useful to respond to uncertainty.
I am confident that there are several such ways. I will go into the fan of posibilities in a later blog. Meanwhile, I suspect that some readers will mull it over, sleep on it, and come up with their own ideas.
Two conditions were used: risk and uncertainty. In both cases, Caltech students played a game in which they chose between a sure thing (say, $3) or drawing a card that could either win them $10 or nothing. They played the game while being scanned by fMRI, so that the researchers could see what brain areas were being activated.
In the risk condition, the students were told that half the cards were red (worth $10) and half were blue (worth nothing). In the uncertainty condition, the students were told nothing about the odds of winning on a trial.
These conditions represent familiar models in game theory, economics and statistics. The risk condition is not risky at all, at least not to anyone who understands gambling. The statistician story: You win $5 on half the trials. On average, 24 trials (the number used in the experiment) will get you $120 if you draw a card every time. If you take the $3 on every trial, you will have $72 at the end of the game. You are quite certain about the best strategy.
In the uncertainty condition, the students did not know the odds and so could not (as easily) determine the best strategy.
Brain findings: In the risk case, the dorsal striatum tends to light up. In the uncertainty case, the more emotional parts of the brain known as the amygdala and orbitofrontal cortex (OFC) are involved.
Camerer’s interpretation: the OFC and amygdala presumably work together when a person is confronted with a bet on unknown odds. The amygdala sends a "caution" message and the OFC processes the message. Under such circumstances, students become more cautions. In this case, they drew fewer cards. The increased caution cost them money.
----------------
Selby's comments: “The increased caution cost them money.” This is the kind of finding that economists are fond of citing as evidence that people do not always make good economic decisions (and would do better if they got advice from economists). But it is only the experimenter, with a God’s eye view of the situation, who can know the correct strategy. If there had been only five winning cards in the deck of 20, the average pay-off per draw would have been $2.50 and the cautious strategy would have saved them money.
Still, the results are important in showing how the brain changes its modules according to the demands of the situation. They are also useful in raising the question of whether there is a less emotional way and/or more useful to respond to uncertainty.
I am confident that there are several such ways. I will go into the fan of posibilities in a later blog. Meanwhile, I suspect that some readers will mull it over, sleep on it, and come up with their own ideas.
posted by Selby Evans at 8:14 AM
0 Comments:
Post a Comment
<< Home