Sunday, November 02, 2008

Neuroeconomics: How Brains Affect Our Gains

* How Neuroscience Interfaces With Economics - Excellent overview of the field of neuroeconomics.

* Wired for Irrationality? - This Business Week summary examines why logic takes a backseat with much decision making.

* How Brains Deal With Uncertainty - This research finds that brain mechanisms for dealing with uncertainty that develops over short time periods (as in trading) are different from those that deal with uncertainty that depends upon past learned associations. Might you be able to differentiate successful from unsuccessful short-term traders from their patterns of brain activation while making decisions?

* Intriguing Review of Cognitive Neuroscience Research
- This article suggests that a variety of disorders have, at their root, a dysfunction in how neural activity in different areas is coordinated: "The impairments of neural synchrony observed in schizophrenia, autism, and AD [Alzheimer's Disease] are consistent with current theories that emphasize a disconnection syndrome as the underlying pathophysiological mechanism. According to these theories, cognitive dysfunctions as well as the overt symptoms of these disorders arise from a dysfunction in the coordination of distributed neural activity between and within functionally specialized regions of the cerebral cortex." Might it be the case that some individuals have exceptionally well developed neural coordination, accounting for distinctive cognitive performance?

* Risk Seeking? - In this study, monkeys are a choice between two alternatives: both lead to the same mean reward, but one choice has higher variability than the other. Like some traders, monkeys show a preference for the risky (high variation) choices, and an area of their brains responsible for the processing of rewards is implicated.

* Prepare for the Worst? - This study finds that, when people are led to expect visual stimuli that are pleasant or unpleasant, they activate the parts of the brain appropriate for each. When they are led to expect unknown stimuli, however, they activate the areas appropriate for unpleasant reactions. Such a "pessimistic bias" make may sense, as the authors note: "Since we do not know what future holds for us, we prepare for expected emotional events in order to deal with a pleasant or threatening environment. From an evolutionary perspective, it makes sense to be particularly prepared for the worst-case scenario." Might we see a different pattern of activation among problem gamblers and addictive traders?