What can "neuroeconomics" teach us about how we think about money?

The economic mysteries of daily life.
Nov. 1 2008 7:55 AM

Money on the Brain

What can "neuroeconomics" teach us about how we shop?

This morning, I had a remarkable experience: I strolled into a delicatessen and bought some delicious Stilton. What made the shopping trip unusual was that I was wearing a brain scanner while I did it. My costume consisted of an electroencephalograph cap, which looks like a polka-dot shower cap with wires plugged into it; a pair of wraparound glasses with a tiny video camera attached; a clothes peg on one finger to measure my heart rate; two other finger monitors that function like a lie detector; a thermometer patch on a fourth finger; and a satchel to hold a computer gathering the data.

Most of these devices, or their equivalent, can be hidden under clothes or baseball caps so that the wearer looks as if they are sporting only shades and an iPod, but in my case the boffins hadn't bothered, and so I entered the deli looking like an extra from a 1970s episode of Doctor Who.

This was all part of my efforts to understand "neuroeconomics," a new, controversial, and eclectic marriage between economics, marketing, and various branches of physiology and brain science. With very different aims, economists and marketers are attempting to tap into the dramatic advances in our understanding of the brain that have taken place over the past 15 years. Their tools encompass mood-altering drugs, tests for hormone levels, animal studies, and fMRI scans (which use immobile scanners to measure blood flows deep inside the brain).

"Neuromarketing" is the simplest application, and the one in which I was participating. David Lewis, a neurophysiologist at the Mind Lab, a spinoff from the University of Sussex, showed me how the physiological readings could be viewed alongside output from my camera to provide a simple but—presumably—useful demonstration of what really grabbed my attention in the deli. Among Lewis' findings are that eating chocolate is more exciting than making out (at least, making out in an electrical shower cap while surrounded by men with clipboards) and that, subconsciously, young men are more interested in sneakers than in the wares on display in an Ann Summers sex shop.

While the possible applications for marketers are obvious enough, such trials are hardly unlocking the deepest secrets of thought. It remains to be seen whether neuroscience has much to contribute to economics itself, a subject that has long focused on the decisions people make, without relying on any particular theory of how they make them. It is also hard to point to anything terribly interesting that the neuroeconomists have discovered, although neuroeconomics may contribute more as time goes by.

Neuroeconomics may provide more shape to the older and more famous field of behavioral economics. A mixture of economics and psychology, behavioral economics has used laboratory experiments to expose a bewildering number of exceptions to the traditional economic theory of rational choice. At present, though, there is little pattern to what the behavioral economists are observing, and it's possible that a greater understanding of how the brain works might help to provide one.

Yet neuroscience might also help reinforce the traditionalists. Wolfram Schultz, a neuroscientist at Cambridge who studies how the brain processes risk and reward, says that just as the brain registers sensations such as sight, he can now see it registering rewards. There was no reason to expect that the mathematically convenient economists' fantasy of "utility" had any real analogue in the brain—but it seems that it might, after all. There's a thought.

Tim Harford is a Financial Times columnist. His latest book, The Logic of Life, will be published in paperback on Feb. 10.