Wining about Neuroeconomics

by on January 15, 2008 at 7:32 am in Food and Drink | Permalink

Neuroeconomics has promise but many of the early results leave me cold.  A forthcoming paper in PNAS, Marketing
actions can modulate neural representations of experienced pleasantness
(subs. required), has all the usual cute pictures of brain scans (see here, if you care) which are used to make the following conclusion. 

Our results show that increasing the price of a wine increases
subjective reports of flavor pleasantness as well as
blood-oxygen-level-dependent activity in medial orbitofrontal cortex
[mOFC], an area that is widely thought to encode for experienced
pleasantness during experiential tasks.

In short, a $90 bottle of wine tastes better than a $10 bottle of wine even when it is the same wine.  But why not just ask people which wine they like best, as many previous studies have done?  How exactly does a picture of the wine-addled brain add to our knowledge?  Are we really so concerned that people would lie about their experiences that we need to put them into a 3 million dollar fMRI scanner to read their brains?   (I wonder if this paper was NSF funded.)

Moreover, the lessons that people are drawing from this study are absurd.  One common response, for example, is "It’s a marketing expert’s dream; if you want people to like your product more, charge a higher price."  Uh huh.  And what happens when every winery raises its price, will we all purchase more wine?

Living in a market economy the association in the brain between price and quality is constantly reinforced so it’s not surprising that sometimes the brain can "jump the gun" in expectation.  But don’t imagine that the association can be easily exploited for long.  Why do you think these sorts of studies always use wine?  Could it possibly be because most people can’t tell the difference between a cabernet and a merlot let alone between higher and lower quality wine?   But try telling people that a $5,000 car is $45,000 and let’s see if the medial orbitofrontal cortex
lights up with experienced
pleasantness.

Thanks to Ted Frank for the pointer.

1 odograph January 15, 2008 at 7:37 am

Hey, I know some guys who discovered this in the 80’s, when they didn’t have enough money to supply a “wine tasting party” and had to refill bottles. They were poor students, and I heard about it because they were amazed that people loved the refilled bottles so much.

2 Student January 15, 2008 at 8:13 am

Um, providing a gateway to measuring subjective experience is a BAD thing in economics?

Funny, I think it’s great. The first thing critics of these kinds of studies complain about is that people can lie on simple surveys (see every single critic of happiness research). Now Neuroeconomics gives an imperfect way of grappling with thier complaints. Besides, just because some studies confirm things we already know doesn’t mean they are not valuable by lending more weight to those conclusions.

Alex, let’s be honest. This is really about politics isn’t it? Many fans of Neuroeconomics draw non-libertarian conclusions fom it and that eats you alive inside. 😉

3 Andrew January 15, 2008 at 8:52 am

“Many fans of Neuroeconomics draw non-libertarian conclusions fom it…”

Please. As if many fans of other economics systems don’t already draw non-libertarian conclusions from them. They can be just as wrong no matter what fancy new graphics they use to justify their suppositions. I don’t think libertarians need to get worked up over whatever new ways these folks determine to delude themselves.

Whether they want to call it “utils” or count the number of happy neurons, there’s nothing in neuroeconomics that contradicts the libertarian philosophy that every individual’s happiness is their own and just as important anyone else’s, as long as it’s arrived at without force or fraud. The objectivists may have trouble with it, but not libertarians.

It’s like studies that come to the shocking conclusion “more money makes people happy (sometimes they forget the “on average” qualifier)!” Wow, what a revelation! They make people use a single fungible resource as the generic medium of exchange, and then you are surprised that more of this fungible resource results in increased average happiness. Then they shout from the rooftops something to the effect “We’ve disproven marginal ordinal utility!” Whatever.

Now if you are referring to the strawman that libertarians believe the market works perfectly, I don’t. I’ve never heard one say that either. All I say on that is that it is just as likely for unscrupulous people to seize consolidated government power as to seize wineries, and all the more damaging.

4 Brainwarped January 15, 2008 at 9:15 am

I agree with Tyler. This type of result makes funding seem wasteful. I would rather see tests done on marginal utilities. Such as, on average, I can tell the difference between 2 packs of splenda and 4 in my coffee. Since 4 packs is too sweet, and I can’t tell the difference between 2 and 3 packs, I use 2 packs to be more efficient in my use of splenda. Now I would pay $55 for a neuroeconomics book that talked about this and similar!!

5 Urstoff January 15, 2008 at 9:25 am

Read Montague’s recent book “Your Brain is (Almost) Perfect” discusses this exact phenomenon. Basically our brain triggers reward signals to the earliest possible signal of quality (in this case, the price) since using value proxies is a cheap and efficient way to navigate the environment (the earlier we recognize something as valuable, the more able we are to acquire it). Now, of course, these value proxies are defeasible; had the “expensive” glass of wine made the subjects vomit, they wouldn’t have liked it as much. But they’re less defeasible than we’d like to admit, since value proxies in our evolutionary environment weren’t prices and brands, but local environmental features.

The fallacy here is to think they’re not genuinely enjoying that glass of wine that was labeled more expensive more than the other one. In fact, they are enjoying it, since they get reward signals from the expensive one and not the cheap one. They’re not being duped, but responding as their brain has evolved to respond to reliable signals of quality.

6 Joe January 15, 2008 at 9:38 am

Great post. In my field of psychiatry, the results of studies like this with their pretty pictures are often implied to be more real and important than a person’s subjective account of their suffering. Fortunately, it hasn’t made it’s way into clinical practice yet, and I predict it will be 25 years before brain imaging has any real utility in psychiatry, if then.

As a professor of mine once said, brain imaging is little more than modern day phrenology.

7 TGGP January 15, 2008 at 10:47 am

Tyler didn’t post this, it was Alex.

I like neato brain pictures, but I nevertheless feel compelled to link to Beware Neuroscience Stories.

8 John Kunze January 15, 2008 at 10:56 am

When you are just learning to drink and appreciate wine you are often uncertain about what you think about a particular wine. You probably don’t challenge that this $50 bottle is better than that $20 bottle. If pushed to give an opinion you lean toward what you think is the more sophisticated opinion.

With more experience, comes more self-knowledge and self-confidence, and you can be more objective about which wine is better.

9 odograph January 15, 2008 at 11:06 am

It’s odd that some people think this is only (questionable) brain scans.

Don’t those experiments with real money and real people show similar things? You heard about the chocolate and sweaters experiment, right?

I think moderate libertarianism is consistent with our fractional economic nature. The problem with extreme market philosophies is that they assume economics is (or can describe) our entire nature. That’s not true for most of us.

Though there is the possibility that extremists are correctly describing their own extreme nature.

10 Noah Yetter January 15, 2008 at 12:42 pm

odograph, read your Mises. All deliberate human action is rational.

11 Person January 15, 2008 at 1:40 pm

Most of wine’s quality *is* the placebo effect. There’s no criterion you can try to meet to chemically optimize a wine’s
quality. Becoming a wine conosieur (sp) who gives the “right” answer about various wines is more of
snobby signaling game. Sorry, the theory fits the data too well.

12 Dan in Euroland January 15, 2008 at 2:34 pm

Odograph,

You might be reading the wrong experimentalists. Here is John A List pitting prospect theory against neoclassical theory, but using actual market participants and not students.

I would recommend you check out List’s work before you completely give up hope on ‘rational’ markets.

13 TomHynes January 15, 2008 at 5:05 pm

I would like to see the experiment repeated with $10 hookers and $90 hookers.

14 TomHynes January 15, 2008 at 5:05 pm

I would like to see the experiment repeated with $10 hookers and $90 hookers.

15 Steve Sailer January 15, 2008 at 9:26 pm

I agree with Tyler that pictures of brain scans seldom add to understanding. Maybe some day, but right now they are mostly used as the equivalent of clip art for Powerpoint presentations.

16 R.C Dietvorst March 27, 2008 at 12:18 pm

Brain images with activation patterns don’t mean much to people that have been reading economic literature their entire career. Quite an arrogant/narrow point of view to assume that activation patterns don’t mean anything in general. For a trained and experienced researcher (e.g. psychologist or neuroscientist) fMRI is a very rich source of information.

But why not just ask people which wine they like best, as many previous studies have done?

Uhhmmm†¦.!!! Do you have any idea on how many different variables interact subconsciously in the brain before a person can say; I like it†¦.?

A lack of interest in these mechanisms (ignorance) might be a good candidate that can explain a lot of criticism of neuroeconomics in general†¦

17 Sword of the New World Gold January 2, 2009 at 3:12 am

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18 jad games February 9, 2010 at 3:54 pm

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19 delightful pm September 12, 2010 at 1:32 am

When you are just learning to drink and appreciate wine you are often uncertain about what you think about a particular wine. You probably don’t challenge that this $50 bottle is better than that $20 bottle. If pushed to give an opinion you lean toward what you think is the more sophisticated opinion.

With more experience, comes more self-knowledge and self-confidence, and you can be more objective about which wine is better.

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