Brain scans can identify who is more "rational" and who is more "emotional," says a new study in the current issue of the journal Science. Researchers at University College London put subjects into a functional magnetic resonance imaging (fMRI) scanner and watched their brain activity as they sorted through some artfully structured choices.
The researchers posed classic Tversky/Kahneman choices framed as gain and loss scenarios. In this case, the subjects were initially told that they would receive £50, but then were told that they had to choose between a "sure" option and "gamble" option. In so-called Gain frame, the choice was framed as choosing between keeping £20 or taking a 40 percent chance of keeping the entire £50. In the Loss frame, the choice was framed as losing £30 or taking a 40 percent chance of keeping it all. Just as Daniel Kahneman and Amos Tversky demonstrated 25 years ago, when the choice is framed as a gain, people tend to be risk averse and pick the sure option; when it is described as a loss, more people become risk-seeking and tend to gamble. Yet, the expected value of both choices is the same. Rationally, people should be indifferent between the two.
So what is going on in the brains of people when they confront choices framed in this way? It turns out that activity is boosted in the amygdalas of subjects who were more prone to the framing effect. The amygdala is an almond-shaped structure located in the middle of the brain that regulates emotions and triggers response to danger. "Increased activation in the amygdala was associated with subjects' tendency to be risk averse in the Gain frame and risk-seeking in the Loss frame," according to the study. On the other hand, the researchers report, "We found a significant correlation between decreased susceptibility to the framing effect and enhanced activity in the orbital and medial prefrontal cortex." In other words, such individuals "acted more rationally." Interestingly, the amygdalas of all subjects became active when confronted by the choices, but in the brains of more "rational" individuals, the prefrontal cortices seemed to be overriding the amygdalas' emotional responses.
Based on such findings that people often behave irrationally, some commentators suggest that the government could perhaps frame laws and regulations so that more of us tend to choose more "rationally." University of Chicago law professor Cass Sunstein and economics professor Richard Thaler call this strategy "libertarian paternalism." Citing the work of Tversky and Kahneman, Sunstein and Thaler point out that "in many domains, people lack clear, stable, or well-ordered preferences. What they choose is a product of framing effects, starting points, and default rules, leaving the very meaning of the term "preferences" unclear." As an example of an acceptable soft paternalistic intervention they point to the differential outcomes when workers are asked to opt into a savings plan versus when workers are automatically enrolled and allowed to opt out. Far more choose to save under the second alternative. So far, so good. Private paternalism of this sort does not pose a huge threat to individual liberty.
However, Harvard University economics professor Edward Glaeser warns, "Successful soft paternalism will make hard paternalism become an increasingly attractive option to the electorate, politicians, and the courts." With regard to saving, think Social Security payroll taxes, instead of 401(k) accounts. Glaeser adds that politicians and regulators are prone to irrational choices too. Private citizens suffer directly from their own irrational errors and thus have much stronger incentives to correct them than do politicians or bureaucrats whose incentives are not directly tied to correcting errors.
Finally, Glaeser notes that voting is fraught with irrationality too. Exercising the franchise is highly prone to error because there is essentially no incentive for most voters to spend time correcting errors or resisting their persuasion. In other words, most voters relax and let their amygdalas guide their choice in politicians and spare their prefrontal cortices from excessive exertion. "The quality of decision-making should be much lower when people are casting ballots than when they are buying commodities," declares Glaeser. "The one advantage of government decision-making—enforcing the wise majority's views on the foolish minority—disappears as psychological errors grow and the majority itself is likely to be misinformed."
The result is that irrationally selected politicians can end up telling us how to make more rational decisions. Frankly, I would rather take my chances with my own prefrontal cortex than submit to politicians who will certainly govern with me with their amygdalas.