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OSU / Psychology / PSYCH 5870 / Define what the term neuroeconomics is.

Define what the term neuroeconomics is.

Define what the term neuroeconomics is.

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School: Ohio State University
Department: Psychology
Course: Neuroeconomics and Decision Neuroscience
Professor: Ian krabjich
Term: Spring 2017
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Cost: 25
Name: Neuro Econ Week 1 Notes
Description: Notes covering week 1
Uploaded: 02/14/2017
35 Pages 340 Views 0 Unlocks
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• How do we make decisions?




• How should we make decisions?




What is Neuroeconomics anyways?



Econ/Psych 5870 - Neuroeconomics Lecture 1 Introduction Ian Krajbich 1Introduction to the course ❖ Overview of Neuroeconomics ❖ Discussion of syllabus 2Who I am ❖ Professor in Psychology and Economics ❖ I research Neuroeconomics ❖ Before coming to Columbus, I lived in Switzerland for 2 years 34Who I am ❖ Professor in Psychology and Economics ❖ I research Neuroeconomics ❖ Before coming to Columbus, I lived in Switzerland for 2 years ❖ Before that, I was at Caltech for college and grad school 56My role in Neuroeconomics ❖ Website: ⮚ http://neuroeconomics.org/about-the-society/ 7What is Neuroeconomics anyways? 8Intersection of the three fields ❖ Economics ⮚ Provides a normative account of decision making • How should we make decisions? ⮚ Tries to explain behavior based on a few simple principles ❖ Psychology ⮚ Provides a descriptive account of decision making • How do we make decisions? ⮚ Tries to explain behavior based on modeling how people actually behave ❖ Neuroscience ⮚ Provides a biological basis for decision making • How does the brain produce decisions? ⮚ Tries to explain behavior based on how the brain is wired 9Course goals 1. Become aware of neuroscience techniques that can address questions of  interest in behavioral economics and other decision sciences ⮚ This course is not intended to convince you that studying the brain is necessary for  testing hypotheses in economics or other behavioral sciences.  ⮚ That said, there are many decision-related hypotheses that can be tested and refined  using neuroscience techniques11Course goals 2. Gain a general understanding of how the brain learns about rewards and  punishment in the environment and evaluates stimuli in order to make  choices13Course goals 3. Be able to critically evaluate studies using neuroscience techniquesThe Opinion Pages | OP-ED CONTRIBUTOR You Love Your iPhone. Literally. By MARTIN LINDSTROM SEPT. 30, 2011 WITH Apple widely expected to release its iPhone 5 on Tuesday, Apple addicts across the world are getting ready for their latest fix. But should we really characterize the intense consumer devotion to the iPhone as an addiction? A recent experiment that I carried out using neuroimaging technology suggests that drug-related terms like “addiction” and “fix” aren’t as scientifically accurate as a word we use to describe our most cherished personal relationships. That word is “love.” This powerful cross-sensory phenomenon is known as synesthesia. As a branding consultant, I have followed Apple from its early days as a But most striking of all was the flurry of activation in the insular cortex of cult brand to its position today as one of the most valuable, widely admired the brain, which is associated with feelings of love and compassion. The companies on earth. A few years back, I conducted an experiment to examine subjects’ brains responded to the sound of their phones as they would respond the similarities between some of the world’s strongest brands and the world’s to the presence or proximity of a girlfriend, boyfriend or family member. greatest religions. Using functional magnetic resonance imaging (fMRI) tests, In short, the subjects didn’t demonstrate the classic brain-based signs of my team looked at subjects’ brain activity as they viewed consumer images addiction. Instead, they loved their iPhones. involving brands like Apple and Harley-Davidson and religious images like rosary beads and a photo of the pope. We found that the brain activity was As we embrace new technology that does everything but kiss us on the uncannily similar when viewing both types of imagery. mouth, we risk cutting ourselves off from human interaction. For many, the 15 iPhone has become a best friend, partner, lifeline, companion and, yes, even a This past summer, I gathered a group of 20 babies between the ages of 14 Valentine. The man or woman we love most may be seated across from us in a and 20 months. I handed each one a BlackBerry. No sooner had the babies romantic Paris bistro, but his or her 8GB, 16GB or 32GB rival lies in wait grasped the phones than they swiped their little fingers across the screens as if inside our pockets and purses. they were iPhones, seemingly expecting the screens to come to life. It appears My best advice? Shut off your iPhone, order some good Champagne and find love and compassion the old-fashioned way.Judgments and Decisions in your life ❖ What are some big decisions you have to make in life? 16Example: Winner reflects on nightmare lottery (CNN.com) 17Judgments and Decisions in your life ❖ What are some big decisions you have to make in life? ❖ What are some occasional decisions you make in life? 1819Judgments and Decisions in your life ❖ What are some big decisions you have to make in life? ❖ What are some occasional decisions you make in life? ❖ What are some routine decisions you make in life? 20Example: Lunch plans?  (ohiofoodtruckfinder.com/osuwmc/)21 Judgments and Decisions in your life ❖ What are some big decisions you have to make in life? ❖ What are some occasional decisions you make in life? ❖ What are some routine decisions you make in life? ❖ What about breathing? Blinking? Falling asleep in class? ⮚ Are those decisions?  22Example: Ohio bans texting while driving  (dot.state.oh.us) 23Judgments and Decisions in your life ❖ What are some big decisions you have to make in life? ❖ What are some occasional decisions you make in life? ❖ What are some routine decisions you make in life? ❖ What about breathing? Blinking? Falling asleep in class? ⮚ Are those decisions?  ❖ We will talk about the similarities and differences between these different  types of decisions. 24Syllabus  ❖ Let’s talk about the plan for the semester! 25Course disclaimer ❖ This course involves some math ⮚ We will be learning about utility functions. You should know what a function is.  • You should understand what this means: � � = �$ ⮚ The math involved is mostly algebra, but used in new applications. ⮚ On problem sets and exams you will need to solve some math problems ❖ This course involves some memorization ⮚ On exams you will need to remember things like: • how different neuroscience techniques work • what different brain structures do • the key findings from various research articles that we discuss ❖ This course depends on in-class learning ⮚ No undergraduate level textbook available ⮚ You will need to learn from lecture/slides and ask questions in class! 26TextbookNeuroeconomics: Decision Making and the Brain. 2nd Edition Paul Glimcher and Ernst Fehr, eds. Academic Press, 2013. A (very) brief history of neuroeconomics 28Descartes’ Error: Damasio (1994) ❖ Phineas Gage ⮚ Injured in 1848 in a railroad construction  accident in which an iron rod penetrated his  head. • Landed 80 ft. behind him! ⮚ Remarkably, he was physically ok. • When I drove up he said, "Doctor, here is business enough for  you." I first noticed the wound upon the head before I alighted  from my carriage, the pulsations of the brain being very distinct.  The top of the head appeared somewhat like an inverted funnel,  as if some wedge-shaped body had passed from below upward.  Mr. Gage, during the time I was examining this wound, was  relating the manner in which he was injured to the bystanders. I  did not believe Mr. Gage's statement at that time, but thought he  was deceived. Mr. Gage persisted in saying that the bar went  through his head. Mr. G. got up and vomited; the effort of  vomiting pressed out about half a teacupful of the brain, which fell  upon the floor. - Dr. Williams ⮚ But his character and temperament changed  (for the worse) 29Gage’s changes ❖ “The equilibrium or balance, so to speak, between his intellectual faculties and  animal propensities, seems to have been destroyed. He is fitful, irreverent,  indulging at times in the grossest profanity (which was not previously his custom),  manifesting but little deference for his fellows, impatient of restraint or advice when  it conflicts with his desires, at times pertinaciously obstinate, yet capricious and vac illating, devising many plans of future operations, which are no sooner arranged  than they are abandoned in turn for others appearing more feasible. A child in his  intellectual capacity and manifestations, he has the animal passions of a strong  man. Previous to his injury, although untrained in the schools, he possessed a well balanced mind, and was looked upon by those who knew him as a shrewd, smart  business man, very energetic and persistent in executing all his plans of operation.  In this regard his mind was radically changed, so decidedly that his friends and  acquaintances said he was "no longer Gage". - Dr. Harlow 30Modern Neuroeconomics ❖ Began around 2001 when Kevin McCabe, Dan Houser, Vernon Smith and  two others published a brain imaging paper on the Trust Game 31Brain imaging? ❖ fMRI  ⮚ functional magnetic resonance imaging ⮚ developed in the mid 1990’s ⮚ for the first time, researchers could safely record activity in the human brain  ⮚ this allowed us to start studying human decision neuroscienceA functional imaging study of cooperatiotwo-person reciprocal exchange A functional imaging study of cooperation in two-person reciprocal exchange Kevin McCabe*†‡, Daniel Houser*†§, Lee Ryan*¶, Vernon Smith*†, and Theodore Trouard*! *Cognition and Neuroimaging Laboratories, University of Arizona, Tucson, AZ 85721; †Interdisciplinary Center for EconoKevin McCabe*†‡, Daniel Houser*†§, Lee Ryan*¶, Vernon Smith*†, and Theodore Trouard*! University, 4400 University Drive, MSN 1B2, Fairfax, VA 22030; §Department of Economics, McClelland Hall 401, P.O. Box Arizona, Tucson, AZ 85721-0108; ¶Department of Psychology, Psychology 312, P.O. Box 210068, University of Arizona, Tu*Cognition and Neuroimaging Laboratories, University of Arizona, Tucson, AZ 85721; †Interdisciplinary Center for Economic Science, George Mason and !Biomedical Engineering Program, AHSC 5302, P.O. Box 245084, Tucson, AZ 85724 University, 4400 University Drive, MSN 1B2, Fairfax, VA 22030; §Department of Economics, McClelland Hall 401, P.O. Box 210108, University of Arizona, Tucson, AZ 85721-0108; ¶Department of Psychology, Psychology 312, P.O. Box 210068, University of Arizona, Tucson, AZ 85721-0068; Contributed by Vernon Smith, August 7, 2001 and !Biomedical Engineering Program, AHSC 5302, P.O. Box 245084, Tucson, AZ 85724 Contributed by Vernon Smith, August 7, 2001 Cooperation between individuals requires the ability to infer each other’s mental states to form shared expectations over mutual Cooperation between individuals requires the ability to infer each gains and make cooperative choices that realize these gains. From other’s mental states to form shared expectations over mutual gains and make cooperative choices that realize these gains. From evidence that the ability for mental state attribution involves the evidence that the ability for mental state attribution involves the use of prefrontal cortex, we hypothesize that this area is involved use of prefrontal cortex, we hypothesize that this area is involved in integrating theory-of-mind processing with cooperative actions. in integrating theory-of-mind processing with cooperative actions. We report data from a functional MRI experiment designed to test We report data from a functional MRI experiment designed to test this hypothesis. Subjects in a scanner played standard two-person this hypothesis. Subjects in a scanner played standard two-person ‘‘trust and reciprocity’’ games with both human and computer ‘‘trust and reciprocity’’ games with both human and computer counterparts for cash rewards. Behavioral data shows that seven counterparts for cash rewards. Behavioral data shows that seven subjects consistently attempted cooperation with their human subjects consistently attempted cooperation with their human counterpart. Within this group prefrontal regions are more active Fig. 1. Diagram of trust game used in the decision making. In the trust game, counterpart. Within this group prefrontal regions are more active Fig. 1. Diagram of trust game used in thwhen subjects are playing a human than when they are playing a DM1 moves first (at node x1) by either moving left, and ending the game, or DM1 moves first (at node x1) by either moving right, giving DM2 a move. If DM1 moves right, DM2 gets the opportunity when subjects are playing a human than when they are playing a computer following a fixed (and known) probabilistic strategy. moving right, giving DM2 a move. If DM1 to move (at node x2). Once DM2 moves, the game ends, DM1 is paid the top computer following a fixed (and known) probabilistic strategy. Within the group of five noncooperators, there are no significant differences in prefrontal activation between computer and human number as a payoff, and DM2 is paid the bottom number as a payoff. By moving to move (at node x2). Once DM2 moves, conditions. Within the group of five noncooperators, there are no significant right DM1 is trusting DM2 to reciprocate and not defect (move right). By substi number as a payoff, and DM2 is paid the btuting different payoff numbers, different incentives for cooperation can be differences in prefrontal activation between computer and human right DM1 is trusting DM2 to reciprocate conditions. Reciprocal exchange (1, 2) is ubiquitous to the behavior of many species (3–5). To make an exchange, it is necessary to studied. tuting different payoff numbers, differestudied.Reciprocal exchange (1, 2) is ubiquitous to the behavior of overcome the desire for immediate gratification in favor of Behavioral Protocol. Subjects responded to cash-payoff salient features of a visually presented two-person binary game tree by many species (3–5). To make an exchange, it is necessary to greater but postponed gains from mutual cooperation. Increased specialization by humans in productive activities, together with pressing response buttons with their right (move right) or left Behavioral Protocol. Subjects resovercome the desire for immediate gratification in favor of hand (move left). The subjects played the role of either first the advantages this has produced, likely has been built on greater but postponed gains from mutual cooperation. Increased features of a visually presented timproved adaptations for social exchange. The social brain decision maker or second decision maker in each game. Second pressing response buttons with tdecision makers saw the first decision makers’ choice before specialization by humans in productive activities, together with hypothesis (6) explains brain growth as largely an adaptation to hand (move left). The subjects making their decision. Subjects were matched with either a the advantages this has produced, likely has been built on more sophisticated forms of social interaction. Such an adapta decision maker or second decisiohuman or computer counterpart and were visually informed of improved adaptations for social exchange. The social brain tion would support more sophisticated reciprocity strategies such their counterart’s te before seein the ame tree. When the Modern Neuroeconomics ❖ Since then the field has expanded dramatically, with hundreds of  researchers around the world and thousands of journal articles 34Next time(s)… ❖ Next class ⮚ Normative decision making ⮚ Decision Theory ⮚ Read Chapter 1 in G&F ❖ Following class ⮚ Experiments in decision making 35

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