A post by Josh Wright on the Truth on the Market blog, Rubenstein on Behavioral Economics, called my attention to a year-old paper by Ariel Rubinstein of the school of Economics at Tel Aviv University and the Department of Economics at New York University. Discussion of ?BEHAVIORAL ECONOMICS? takes issue with the emerging field of behavioral economics in general and neuroeconomics in particular. Some of his criticism of neuroeconomics could no doubt apply to neuromarketing as well. In the paper, presented at Advances in Economics and Econometrics Theory and Applications, Ninth World Congress, Rubenstein makes the point that work in this area is oversold.

Consider, as an example, the fMRI study by Sanfey et al. of the ultimatum game with $10. Camerer, Leowenstein and Perlec (2005) refers to it as ?one of the most striking neuroscientic findings about game theory?. It is claimed that the activity in an area in the brain which is associated with negative feelings (in a statistical sense) is greater when an individual considers an offer of $2 than when he considers an offer of $5. It is also greater among individuals who accept a $2 offer than among those who reject it. Sanfey et al.?s interpretation of the observation is that in response to an unfair offer, the brain struggles to resolve the conflict between the desire to accept a monetary reward and the ?insult? of being treated unfairly. I bet they are right! What other considerations can cross the mind of a player who is offered $2 out of $10? If confirmed by fMRI studies, it would be a cause for celebration among fMRI researchers. But the results themselves are not that clear.

Problems: If there are two centers in the brain that express conflicting emotional and cognitive motives, which brain center resolves the conflict? Does the increase in brain activities come before the subject?s decision or does it reflect his feeling after he made up his mind? If the finding is correct, would one not expect the time response of those who accept an insultingly low offer to be shorter than that of those who reject it? In fact, I found (among 3700 subjects) the distributions of response time of those who accept the offer and those who reject it to be amazingly similar. (See Rubinstein (2004b)) In any case, the findings far from justify the title – ?The Neural Basis of Economic Decision-Making in the Ultimatum Game?.

Rubenstein doesn’t dismiss the idea that neuroscience can inform economics completely, noting,

Of course, brain studies are fascinating, probably more so than even… economics. I would not be surprised if brain studies eventually change our view of decision making. However, I have yet to come across a single relevant insight produced by these studies. The popularity of brain studies might have to do with the obsession among many economists of becoming scientists.

This may be a harsh indictment of some serioius research, but these cautions apply even more to neuromarketing than neuroeconomics. Would-be neuromarketers are willing to take any scrap of data and run with it, often without a solid basis for doing so. Where else would a researcher stick a tiny number of subjects in an fMRI scanner and declare “Super Bowl ad winners”? (See Super Bowl Ads: GoDaddy Girl 1, Neuroscientists 0.) What the field really needs is rigorous research that establishes a clear link between specific observations of brain activity and an ultimate purchase. It’s not enough to find that one ad lights up an area of the brain more than another ad – that may be suggestive, but it’s not proof. The sooner such research is conducted and published, both neuroeconomics and neuromarketing will be taken a lot more seriously, and we’ll see businesses investing real money in private studies.

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