[NOISE]. I'm really happy to give you an introduction to Neuroeconomics. This is exciting, new interdisciplinary field that combines neuroscience, economics, psychology together. In order to build a new unified theory of human decision making. So during this course. I will give you an introduction, so I will not give you all fields or directions in the neuroeconomics. So today, I will try to present you main assumptions of neuroeconomics. During the next lecture, I will give you major brain imaging techniques of neuroeconomics. So that will be the Module I of this course. During the Module II, I will present you the major models of neuroeconomics and we will understand how brain makes decisions. During Module III, we will focus on emotional mechanisms of decision making. So we will discuss how effects, emotions modulate and program our decisions. And finally, during the Module IV. We'll discuss how decisions are made in various social contexts. We will also focus on the evolutionary basis of decision making. We will discuss some similarities of our decision making and animals' decision making. Can we find similar financial decisions in humans and monkeys? So that will be the topic of our final module. So now, I will give you few hints what you can expect in this course and [UNKNOWN] what you shouldn't expect from this course. So first of all, this is a relatively short introduction to neuroeconomics. If you would like to read about some specific directions in neuroeconomics, you will have to read additional literature. Of course, I will focus on limitations of neuroeconomics. Neuroeconomics uses a lot of brain imaging techniques. All of them are limited, so at the moment perhaps we cannot address all questions related to decision making using neuroeconomics approach. And you will face trivial and nontrivial facts as neuroscientists. You can, a bit irritated by my version of neuroscience, a simplified version of neuroscience. As economists, you can be irritated by the simple version of economics in this course. But I do it on purpose, because we have a very multidisciplinary audience. So in order to build a joint language, to merge our group together, I will try to use are some simplified terms and concepts. To create a common theory of decision making. So we will discuss various paradigms, and we also focus on quite difficult papers. So be prepared that majority of neuroeconomics papers are written by neuroscientists. And they use quite specific language, so it can be quite complicated. It can have a lot of technical details. So be prepared to read quite complex papers. Please do not expect the unified series of Neuroeconomics. This is a very young field, so it doesn't have right now a unified theory, but have a lot of different concepts that in the future perhaps. We'll be organized into a unified theory of human behavior. So we will not discuss all aspects of neuroeconomics within this course. And unfortunately, because this field is very young, there is no one single easy to read handbook. So be prepared to read quite complex papers. So, overall, neuroeconmics is based on a simple, but astonishing hypothesis. This hypothesis is very nicely formulated by Francis Crick, a Nobel Prize winner. We just suggested that our mental activity, our decisions, is nothing more but the activity of our brain. So our mental activity is simply a biochemical process in our neurons, in our neuronal percolation. This a very simple idea. But it can be quite easy to accept if when you're a scientist. But at the same time it can trigger conflict for social scientists. So from this perspective our decisions, our mental activity is nothing more but the activity of our brains. And if you are against this idea, if you are against this astonishing hypotheses you anyway have to adopt this idea for this course. So this basically is a foundation of neuroeconomics. So strictly speaking, neuroeconomics is a field combining psychology, neuroscience, biology, and economics. Together to build a unified theory of human behavior. Of course, neuroeconomics focuses on decision making. And we will dedicate this course to the neurobiological aspects of decision making. Neuroeconomics is a very much influenced and dominated by neuroscience. So, already now in the key handbooks on cognitive neuroscience, you can find a chapter on neuroeconomics. But of course, there are also books specifically published by neuroeconomists. I strongly recommend you to read books created by Paul Glimscher or by key neuroeconomists. I will give you some hints which book I would recommend you to read during the course. Of course, we can use another label for neuroeconomics, neuroscience of decision making. Actually, this second label is becoming more and more popular. So we can use either the term neuroeconomics or the neuroscience of decision making. Both terms tries to emphasize that neuroeconomics focuses on the neurobiological aspects of decision making. So neuroscience is a field of biology that traditionally focus on nervous system and this is a branch of biology. So traditionally, neuroscience investigates neural networks and activity of the neural networks underlying our behavior. So for example here, we can trace all neurons that are programming our voluntary movements. This network starts in our sensory neurons. And next the information is translated to cerebellum, to thalamus,to the motor cortex, and the motor cortex send information back to muscles. So in simple situations, when we program very simple voluntary movements. A limited number of neurons is involved into the programming of our motion. If we have more complex, goal directed movements. Of course, more neuronal populations are involved. And it can be a quite complex neuronal network. But neuroscience suggests if we would understand how this network is working, we can understand voluntary movement. And we can understand how decisions are programmed. For neuroscience, it's enough to understand their neurobiological machinery behind the decision making to fully understand decisions. So, from the neuroscience perspective, our decisions are programmed by neural networks. So, somewhere in this complex network our decisions are programmed and sent to the motor system. Of course, advanced neurons are communicating with each other by synapses. So somewhere in this synapses, where chemicals are produced for communication between neurons, our decisions are programmed. So traditionally, our behavior has been studied by various fields of science. So of course, we understand that our decisions, our behavior, is affected by our genes, by our neural activity, by the activity of the whole brain. By our cognitive system, by the society, by social context, and by the environment. So traditionally all these aspects of decision making were studied by different fields. By neuroscience, by cognitive psychology, by social sciences, by economics. What is ambition of neuro-economics, they'll merge all those fields together and create a unified theory of decision making. So this is a very ambitious plan, but this is a very exciting and provocative idea. And i hope that you will also get this excitement about this new proactive field from this course. So what is reason to combine economics, psychology and neuroscience together. I think there is a very fundamental reason to do it, so all of these sciences have own biases. They are very much limited and narrowed by own field. So they have certain assumptions that are quite often violated by different fields of science. So I'll just give you three examples how very important measure assumptions of different sciences are violated. Questioned by different fields of science. So for example, economics. Normative theory economics suggest that we are rational it will make our decisions rationally. So it suggests that our decisions are consistent and logical. Economists in this audience will no famous example. So-called Asian disease example, illustrating a lack of rationality in our decision making. But biologists and people from, other students from other disciplines may have, not know. So I will once again mention this famous example, so-called, Asian disease example. Imagine that there is an outbreak of a strange Asian disorder in the United States. This disorder is expected to kill 600 people. Imagine that you're on the special medical committee. And this committee has to select one of the programs to treat this disorder. According to the, to the Program A. If Program A is adopted, 200 people will be saved. If Program B is adopted, there is a 1 3rd probability that 600 people will be saved and a 2 3rds probability that no people will be saved. So, which program would you select? Think for a moment. A lot of people, and many studies show this, prefer the Program A, because this program guarantee that 200 people will be safe. But let's now make a decision and select between two other options. Imagine that you're offered by two other programs. If you will adopt Program A, 400 people will die. If you will adopt the Program B, there is a 1 3rd probability that nobody will die, and 2 3rd probability that 6, 600 people will die. So which program would you select now? Think for a moment. And many studies show that people prefer program B here. But come on, let's talk for a moment, and compare these two programs. So, there's two versions of this experiment. You can see here this are identical options. Just make you look to the program A. In the first example, if Program A is adopted, 200 people will be saved. But this is identical program to the Program A below, that states that if it is adopted 400 people will die. They're two identical programs, but they're framed in a different way. So in the first case, it is framed as in their gain demands. So 200 people will be saved. But in the second case, it is framed in the loss domain. It suggest that 400 people will die, but these are identical programs. So surprisingly, simply the framing of the options can change our decisions. So, our rationality is quite limited. Of course, we cannot say that we are logical and we are consistent. Our decisions are very much dependent on the framing of the options. So, psychology, many times questions the assumptions of the normative economics that we are rational, that we make rational decisions. But psychology itself suffers from some old biases and I like so called circular reasoning problem criticism. Psychology investigates our behavior. And based on our behavior suggests some cognitive processes, cognitive systems that can modulate our decisions. Memory, attention can modulate our decision. But, psychologists study our behavior. And based on behavior, suggest some cognitive systems. Cognitive process. But in fact, they explain behavior by behavior. Does it bring us some new insights to the mechanisms of our behavior? Should we go step lower to understand our mental activity? Lower from our behavior, for example, to the neural level, in the same way as nuclear physics. In order to explain our macro level physics, try to study the structure of our atoms, atomic structure. And this perspective would bring us completely new insights to the micro level. In the same way, to avoid the circular reasoning problem, we have to go one level lower. For example, explain our behavior, our decisions, by neurologic activity. That will bring us new insights to the actual mechanisms of our behavior and our decision making. At the same time, neuroscience suffers a lot from the tradition to investigate the single brain. So, neuroscience is very much egocentric. Neuroscientists really believe that if we will investigate the single brain of single individual. We can understand the brain mechanisms of decisions of our behavior. But in reality,we never make our decisions alone. In reality, we make our decisions in social context, in interactions with others. I really like this experiment conducted by a post doc in Cambridge. So, a very simple exp, experiment. But it is very illustrative. Imagine is that, this scientist. Just feeding ducks in Cambridge in the, in a lake. So he feeded the ducks with a constant rate two grams per five seconds. And his friend on the other side of the lake feeded also ducks, but with a slower rate, only two grams per ten seconds. So what should you do as a small duck. Perhaps you will go to the place where there is more food available. But if all ducks goes there you will have a shortage of food. It will be smart to go to the side B where there is no ducks. So your decision depends very much on the decisions of others. And if we will make a list of the distribution of ducks in this experiment. Very quickly, the number of ducks is distributed in a very rational way. According to the Nash equilibrium suggested by decision theory, by game theory. So, when you make your decision, your decision is very much dependent on decisions of others. And it's very nicely illustrated by economics and also by psychology. So in order to understand our decisions, we have to understand how decisions are made in social context. how to we take into account decisions of others? So altogether, neuro-economics is trying to combine various fields. To build a unified theory of decision making. Now genetics, economics, psychology, neuroscience are merging together to build a unified theory of decision making. [SOUND] [MUSIC]
