Can Marginal Utility be Measured?

by on April 5, 2007 at 7:07 am in Economics | Permalink

Reporting in the current issue of Neuron, the scientists
reveal that when a small sum of money is on the line, poorer people
learn quickly how to maximize their profits, leaving their wealthier
counterparts in the dust.

In a Pavlovian paradigm, a number of abstract shapes flashed
in front of 14 participants. After each shape appeared for three
seconds, a picture of either a 20-pence coin (roughly 40 cents) or a
scrambled image followed. A card of one particular shape was always
followed by the coin, and subjects were told that they could take a
20-pence piece home if they could accurately predict when the money
card was the next one up….

The poorer people tended to figure out
which card signaled money ahead within about 12 trials… whereas the
richer people took about 35 trials.

The team next repeated the experiment while the subject’s brains
were scanned by an fMRI (functional magnetic resonance imaging)
machine. …This time, however, the participants did not have to physically respond. "We
didn’t want them to do that because there are neurons in the striatum
that are responding to initiate an action of responding to reward,"
Tobler says. It was this response preparation that the researchers
timed.

Once again, an inverse association between wealth and learning
appeared, with poor people displaying more increased activity in the
midbrain and striatum when compared with the more affluent subjects.

From Scientific American, the article is here.

Thanks to Rey Lehmann for the pointer.

David Peterson April 5, 2007 at 10:15 am

It kinda sounds to me like they’re somehow trying to imply that rich people are stupid and undeserving of their money.

meep April 5, 2007 at 10:24 am

Going with the post title, it indicates that the marginal utility of a few pence is rather small for the rich. I’m sure if the reward were bumped up to something noticeable for these guys (say $100), they’d be much better at this. They’ve got less of an incentive to figure out the game.

Bastiat April 5, 2007 at 11:48 am

Person: Not so. There is a utility cost of the effort required to figure out the game, and a utility benefit from the money earned. The comparison that the game participants make between these utilities is ordinal, not cardinal. Mises 1; You 0.

The Garbageman April 5, 2007 at 12:03 pm

Tyler: How far in your web of belief is the principle of marginal utility? What would it take to disconfirm it?

Brad Hutchings April 5, 2007 at 12:20 pm

I see a South Park episode in this. Kenny gets killed by the fMRI machine and Cartman has to end his school science fair project.

joshj April 5, 2007 at 12:52 pm

This is just wierd.

Mark Thoma April 5, 2007 at 1:24 pm

I commented a bit more on the article here:

http://economistsview.typepad.com/economistsview/2007/04/scientific_amer.html

It includes some additional excerpts from the press release on how they tried to measure marginal utility. I was less than impressed.

Doug April 5, 2007 at 6:15 pm

A lot of the traders in the commodities pits in Chicago came from relatively humble backgrounds, with the stereotypical profile being the “former cab driver”. Floor trading requires a lot of the same pattern recognition skills as displayed in this experiment. In fact, many successful floor traders look for the “hungry, street-smart” type as protoges, saying that overly smart, Ivy-league types “think too much”.

Look at the backgrounds of a lot of champion poker players – a few MIT rocket scientist types, but a lot of people who grew up in the “culture”, so to speak.

Chairman Mao April 6, 2007 at 3:26 am

Prof. AT,

Perhaps the rich are more focused on the ‘bigger picture’ which is why they tend to be more affluent. The poor, by necessity or by design are better attuned to ‘cheap thrills’ and miss big opportunities when they arise.

Jeffrey Miller April 6, 2007 at 9:18 am

It should be obvious that you can’t conclude anything about supposed differences in the brains of “rich” people and “poor” people based on a sample of 14 subjects. It’s ludicrous.

Neuromarketing April 8, 2007 at 8:14 pm

Lee, I think all subjects were students, so presumably age differences were minimal. And Jeffrey, you bring up a point common to most fMRI studies – they use small numbers of subjects, so any differences between groups must be very pronounced to be significant. Fine statistical differences just won’t be evident.

I think the study results makes sense, and there’s no need to over-think it. In fact, one might argue that the study merely confirms the obvious – a small amount of money is more attractive to someone without much money than to someone with lots of it. Still, plenty of studies meant to confirm what is already common wisdom have encountered unexpected results.

ç³–å°¿ç—… April 9, 2007 at 5:21 am
wslmwps August 14, 2007 at 3:59 am

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