Neurobiology of trust

Neuro-economics is a burgeoning field, that I have written about before. Read about a fascinating experiment in trust, using a game scenario like economists often do. The twist is that both the participants are in the fMRI scanner so their brain activity can be watched by scientists.

The terms of the game were like this: “At the beginning of each round, Belur could put up to $20 in play. Any investment automatically tripled. Tang then decided how much to return and how much to keep.

Belur’s safest strategy was to hoard all of her money. Tang’s most logical move was to cheat her partner at every opportunity.

There was a riskier but potentially more profitable way. They could trust each other.”

Economists understand by now that human beings often behave in so called “irrational ways” (i.e., not in the optimum fashion based on economic theory”. However, they don’t quite know how to factor in this irrationality into their mathematical models.

“People trust other people when economic theory says they should not. They cooperate when betrayal seems more rational. They gamble foolishly, overestimating risk when they are losing, and underestimating it when they are winning. They spend too much and save too little.”

In a sense, economics is simply incorporating some elements of psychology as well – by probing this so called “irrationality”.

In contrast, after 3 years of working as a consultant (read: out of academia), my concern often is that psychological theory does not take the economic motive sufficiently into account. For example, you can predict that a certain product will be easier or more difficult to use, or more enjoyable. However, that might not be the way it will play out in the market, where the decision might be based on what product people are willing to “buy”. So, coming from the other direction, my take is that psychologists (at least those who are working in the field, rather than in Universities) must take the economic imperative into account.