Explaining human decision making through neuroeconomics -- "Which would your rather receive: a small immediate reward, or a larger reward at some point in the future?"

Which would you rather have to eat, a hamburger, freshly made right now, or a delicious meal in a couple of hours (such as you might eat at a restaurant which often has customers lined up outside)? Neuroeconomics is the study of human decision making from the viewpoints of economics, brain science, and psychology. This new field constrains and guides new economic models that attempt to explain actual human economic activity.

Rewards such as money and food are necessary for living in modern society. However, the level of pleasure one feels upon receiving 1 million yen certainly differs between a rich person and a student. The experience of pleasure is subjective and cannot be measured in absolute or objective terms. In economics, pleasure or satisfaction are referred to as "utility" or "value." Modern economics examines human behavior by assuming that individuals behave in relation to their individual subjective perceptions of utility or value. So what factors influence the impression of utility and value? Experiments in psychology and economics have demonstrated that people are influenced in their decision making by how quickly the reward is received and also by the size of the reward.

Combining economy, psychology, and brain science

How does reward system in the brain work? Researchers in brain science have conducted experiments in reward-driven action learning and decision making. For example, in an experiment, scientists set a lever that, when pressed, would electrically stimulate the pleasure centers in a rat's brain. Once a rat was given free access to self-stimulation, it continued to press the lever until it collapsed from exhaustion. Pressing the lever was a reward that surpassed its desire for food or water.
The neurotransmitters dopamine and serotonin seem to play major roles in the brain with regard to the probability of reward and intertemporal decision making.
TANAKA Saori , Associate Professor, is involved in neuroeconomic research in a quest to design models of economics based upon human decision making in choosing between multiple alternatives when choosing the optimal course of action.

The intensity of pleasure decreases over time

Dr. TANAKA correlates human decision making in terms of time -- the decline in utility over time, which is referred to as Time Discounting.

Interview with Dr.TANAKA  -- Time discounting may lead to self-control.

100 doughnuts in a year

What is Time Discounting?

"For example, the pleasure of seeing a doughnut in front of you is far greater than the pleasure of being told that you will receive a doughnut in a year. People generally want a reward sooner rather than later. Alternatives that delay the receipt of a reward make it less attractive and, thus, people discount the reward, 'Time Discounting.' However, the effect of the Time Discount can be reduced by either making the reward, after waiting, greater or by reducing the risk in waiting. Thus, if you are told you can have one doughnut now or 100 in a year, the probability of your making the decision to wait for the 100 increases in relation to your trust in the giver of the doughnuts and/or the certainty of there being 100 doughnuts at the end of the year. In other words, the Time Discount can be reduced, and when it is, 100 after a year becomes more desirable than one now."

Research in  serotonin and other substances in the brain

You conduct various experiments, don't you?

"As in the case of hamburger which I mentioned earlier, a discount rate can be obtained from experiments in which subjects are asked to choose a smaller-sooner reward or a larger-later reward. These kinds of choice questions are called ' intertemporal choice questions .' For example, we elicit discount rates by asking subjects, 'Which would you choose: 10,000 yen in two days or a larger amount in nine days?'
To measure discount rates, we developed intertemporal choice questions that can be easily done intuitively. We conducted experiments using children and adults as well as patients with impulsiveness in order to find time discount relationships between a variety of factors such as age, personality attributes, the level of serotonin and other substances in the brain."

Differences in reward and loss may be related to the degree of obesity

Any other concepts in neuroeconomics?

"For example, if you are told you must pay one million yen a year from now, you may be immediately offended. But, if you are told that you will receive one million yen in a year, your pleasure at that will be less than the shock of having to pay one million yen. In economics, such a gain and loss asymmetry is called " sign effect " in which future losses are discounted to a lower rate than future gains.

"Professor Shinsuke IKEDA and Professor Fumio OHTAKE at the Institute of Social and Economic Research are examining the relationship between time discounting and body mass index (BMI) and found that the obesity degree in the group not exhibiting the sign effect was higher than that in a group exhibiting the sign effect.
"We examined the sign effect using a repeated-intertemporal choice task with both gains and losses, and measured brain activity with functional magnetic resonance imaging (fMRI). The results indicated that the sign effect could be caused by asymmetrical representation of delay information of gains and losses in the striatum.
"Some scientists point out that time discounting may actually affect body mass formation and debt holdings. In order to clarify causes of such social problems and prevent and treat those with such problems, we conduct research in economics and brain science."

Dr. TANAKA, you graduated from the School of Science, Osaka University.

"Yes, I majored physics as undergraduate student and studied the brain at graduate school. You may wonder why a brain scientist is working at the Institute of Social and Economic Research. This institute is focusing on behavioral economics and conducts experiments. We'd like to integrate economics with brain science in a meaningful way."