Not all of neuro-economics uses brain scans. Andrew Lo, a professor at the Sloan School of Management at the Massachusetts Institute of Technology, applied polygraph-like techniques to securities traders to show that anxiety and fear affect market behavior. Measuring eye movements, which is easy and cheap, helps the researcher ascertain what is on a subject's mind.
Other researchers have opened up monkey skulls to measure
individual neurons; monkey neurons fire in proportion to the amount and probability of rewards. But do most economists care? Are phrases like "nucleus accumbens" -- referring to a subcortical nucleus of the brain associated with reward --
welcome in a profession caught up in interest rates and money supply? Skeptics question whether neuro-economics explains real-world phenomena.
The neuro-economists admit that their endeavor is in its infancy. It is difficult to identify brain modules and their roles. Even if one part of the brain is active at a parti-cular moment, how is that incorporated into a person's broader method for making decisions?
The number of people scanned in any study is typically small, if only because the hookups cost about US$500 an hour and require access to an expensive machine. Furthermore, the setting may matter. Perhaps we cannot equate choices made on the New York Stock Exchange trading floor with choices made under a hospital scanner, where the subject must lie on his back, remain motionless and endure a loud whirring, all the while calculating a trading strategy.
That said, neuro-economics will make huge strides as technology allows researchers to identify more brain regions and read brains more accurately and at lower cost. It is a growth area in a profession that knows human feelings matter, but does not always know what to do with them.
The next step? Perhaps neuro-economics should turn its
attention to political economy. Do people use the same part of their brains to vote as to trade? Is voting governed by fear, disgust or perhaps the desire to gain something new and exciting?
Tyler Cowen is a professor of economics at George Mason University.
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