Friday, April 20, 2012

How we decide

Each decision we make, however rational we believe it to be, is an emotional, neurochemical tug-of-war inside our brain:

"Consider this clever experiment designed by Brian Knutson and George Loewenstein. The scientists wanted to investigate what happens inside the brain when a person makes typical consumer choices, such as buying an item in a retail store or choosing a cereal. A few dozen lucky undergraduates were recruited as experimental subjects and given a generous amount of spending money. Each subject was then offered the chance to buy dozens of different objects, from a digital voice recorder to gourmet chocolates to the latest Harry Potter book. After the student stared at each object for a few seconds, he was shown the price tag. If he chose to buy the item, its cost was deducted from the original pile of cash. The experiment was designed to realistically simulate the experience of a shopper.

While the student was deciding whether or not to buy the product on display, the scientists were imaging the subject's brain activity. They discovered that when a subject was first exposed to an object, his nucleus accumbens (NAcc) was turned on. The NAcc is a crucial part of the dopamine reward pathway, and the intensity of its activation was a reflection of desire for the item. If the person already owned the complete Harry Potter collection, then the NAcc didn't get too excited about the prospect of buying another copy. However, if he had been craving a George Foreman grill, the NAcc flooded the brain with dopamine when that item appeared.

But then came the price tag. When the experimental subject was exposed to the cost of the product, the insula and prefrontal cortex were activated. The insula produces aversive feelings and is triggered by things like nicotine withdrawal and pictures of people in pain. In general, we try to avoid anything that makes our insulas excited. This includes spending money. The prefrontal cortex was activated, scientists speculated, because this rational area was computing the numbers, trying to figure out if the product was actually a good deal. The prefrontal cortex got most excited during the experiment when the cost of the item on display was significantly lower than normal.

By measuring the relative amount of activity in each brain region, the scientists could accurately predict the subjects' shopping decisions. They knew which products people would buy before the people themselves did. If the insula's negativity exceeded the positive feelings generated by the NAcc, then the subject always chose not to buy the item. However, if the NAcc was more active than the insula, or if the prefrontal cortex was convinced that it had found a good deal, the object proved irresistible. The sting of spending money couldn't compete with the thrill of getting something new.

This data, of course, directly contradicts the rational models of micro-economics; consumers aren't always driven by careful considerations of price and expected utility. You don't look at the electric grill or box of chocolates and perform an explicit cost-benefit analysis. Instead, you outsource much of this calculation to your emotional brain and then rely on relative amounts of pleasure versus pain to tell you what to purchase. (During many of the decisions, the rational prefrontal cortex was largely a spectator, standing silently by while the NAcc and insula argued with each other.) Whichever emotion you feel most intensely tends to dictate your shopping decisions. It's like an emotional tug of war."

~ from 17/04/12