Interesting article, however I was a bit intrigued by this quote:

“Does it make sense to play tough with a person you meet on a street in L.A.? No. For one thing, you will probably never see that person again. For another, he may pull out a gun and shoot you.”

Have the mean streets of New York been gentrified to the point of cultural insignificance?

Is it just me, or does the New Yorker sport an very narrow bias when it comes to economic writing? Every article seems to presuppose a high quality education and ample access to captial.

The studies cited did deal with small numbers, but I didn't see any evidence of trying to control for income levels. Traditional economic models about the idealized rational actor don't have this issue, since they presupposed the most rational decision in these types of experiments.

But if you are trying to show that humans are incapable of this consistently, shouldn't you try to determine if there are correlations between risk aversion and economic status relative to the values they are dealing with?

Four bucks is four bucks, but to some who pays $2,500 a month for housing versus someone who pays $500, ten potential bets can have a material difference on the lower end, presuming the income matches their expenses.

Was it me, or did that entire article gloss over this?

That oxytocin sounds like a good time.

99, there may indeed be a correlation between risk aversion and socioeconomic status, but that's not what neuroeconomics is about. It takes risk aversion as a given, and then seeks to uncover what happens, neurologically speaking, when that risk aversion kicks in.

Silly 99.

But money isn't abstract or a given. The point of neuroeconomics, I thought, was that someone was willing to quantify the impact of "value" (that is, a dollar isn't the same to all people, so they will all use competing, and, to them, rational processes) as it relates to the ostensibly crystalline rationality of the market.

Since money is a realtively recent phenomena -- biologically speaking -- compared to the risk aversion developed for fire or tigers, what can chemistry tells us in a scientifically meaningfully way as befits a four dollar bet?

If it doesn't try to take into account other information, isn't this just another spin on the same tired rational actor model?

Sterling likes to yammer about color televisions and blacks and you have internalized the entirety of the liberal economic superstructure, but have either of you, but have actually been poor?

The fact of the matter is, poor decisions about shoe buying in a narrow slice (which is much a structural issue as a personal one) aside, poor people are fabulously more efficient when it comes to risk and economic decisions compared to the spending habits of the rich. But the underlying thesis of all the articles, particularly when filtered through the Conde Nast entitlement machine (which is weird, because otherwise The New Yorker seems to escape this) is that poor people wouldn't be poor if they weren't so stupid, emotional, etc.

Most of the world lives on less than two dollars a day. How much more efficient and rational can you get? Yet these scientists think they can develop biological models that explain a species -- because if it doesn't, the racial breakdown of wealth is going to run them real hard into charges of racism -- when their tests don't control for the fact that most of the time, they are asking people to make wagers equivalent to a half's week pay? Considering the savings rate of this country, that's a big fucking bet, but it isn't structured like that.

These are all important questions, because if all those game models were restructured to make $1,000 bets, they'd end up with a real dull article, since risk aversion would go through the roof, and everyone would find out real quick that the discussion should focus on the emotional perception of wealth and what is truly discretionary, if there is such a thing. It's really just an macroeconomic issue of income redistribution. A small minority of people (larger, relatively than it has been historically, in real and relative terms) now regularly possess sums that are subsistence amounts for the majority, and can dispense the those sums with no attachment to rationality or risk. We've understood that behavioral pattern since Nero.

Yet these scientists think they can develop biological models that explain a species -- because if it doesn't, the racial breakdown of wealth is going to run them real hard into charges of racism...

Which is exactly why I've stayed out of this discussion.

The point of neuroeconomics, I thought, was that someone was willing to quantify the impact of "value" (that is, a dollar isn't the same to all people, so they will all use competing, and, to them, rational processes) as it relates to the ostensibly crystalline rationality of the market.

Well, 99, you thought wrong. Sorry. Neuroeconomics really has nothing to do with that, and certainly has nothing to do with "the market", whether the market is rational or not.

Well, 99, you thought wrong.

Silly 99.

Neuroeconomics combines neuroscience, economics, and psychology to study how we make choices. It looks at the role of the brain when we evaluate decisions, categorize risks and rewards, and interact with each other.

I guess I should have said 'behaviorial economics'.

Regardless, I still fail to see how you can make conclusions about chemical processes in the brain when the experiments don't control for existing preconceptions of monetary value.

A hot stove is a hot stove. You pick a temperature point and stick your hand over it. That's risk aversion testing, and can be applied pretty broadly, culturally speaking. The same cannot be said for four dollars.

In english, all 99 is saying: people do not have isoelastic utility functions.

He's probably right.

I think Gavin meant to link to this.