Tuesday, July 11, 2006

Fehr and loathing

Interesting research from Ernst Fehr at Zurich University's Institute for Empirical Economic Research, as presented this week at the Forum of European Neuroscience in Vienna.

Fehr claims to have found a neurological basis for compliance with economic and social norms. His research started with a simple economic game in which players chose to share an initial pot of money with an anonymous partner. In a repeat game, the second partner could punish the first if he felt he'd been cheated. Unsurprisingly, the first player chose to share more money if he knew the second could punish him.

The change in a handful of players was more marked, however. On average, people would give 10 units from their pot of 100 without the fear of punishment, and 40 with. A few players gave nothing in the first game, and almost half in the second.

MRI scans of the players showed strong activity in the parts of the forebrain that deal with punishment stimuli and impulse control, as expected. But Fehr also found strong activity in the nucleus caudatus, part of the brain that deals with rewards systems, when the players faced punishment. The greater the activity here, the greater the change in behaviour between the first game and the second. Fehr says this shows that economic decision-making is much more driven by the emotions than the 'rational man' model of conventional economics claims. Emotional engagement with social norms also play a major role.

Earlier work by Fehr showed that the prospect of being able to punish unfair players in a similar game also activates the nucleus caudatus. This could explain why people are often prepared to accept personal disadvantages to punish others - enforcing the social norms by punishing perceived cheats just feels good.

The implications obviously go beyond economics.



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