Fight, Flight, or MasterCard

There is a lot of buzz right now in the mental health field about advances in neural imaging and the growing application of brain scans. It used to be that the only “topography” clinicians cared about was that of the conscious (pre-, sub-, un-, and regular), but now there is a surge in collaboration between those who study the brain and those who study the mind.

Including, it seems, those who study how the mind dictates economic behavior. This brings us the relatively new field of neuroeconomics.

The Economist just published a fascinating article about a Carnegie Mellon study where researchers mapped the brain activity of subjects evaluating a product and deciding whether or not to buy it.

In the experiment, subjects were shown a series of products flashed on a computer screen for four seconds. After each product was shown, its price was displayed for four seconds. Finally, the subject had four seconds to decide whether or not to “purchase” the product out of the $40 fee they were given for participating in the study.

The researchers discovered that different parts of the brain handled different sub-tasks. The nucleus accumbens, which processes potentially rewarding stimuli such as food or monetary gain, was activated when the subject was viewing the product. When the price appeared, activity switched to the insular cortex. The insular cortex is associated with expectation of pain or presentation of upsetting material.

The more attractive the product, the greater the activity in the nucleus accumbens. The more prohibitive the price, the more fired up the insular cortex became.

These reactions were synthesized by the medial prefrontal cortex, the part of the brain involved in rational calculation and predicting outcomes. The prefrontal cortex had to make the “choice” between balancing the desire for the product with the anxiety created by the price.

Here’s what’s interesting about these findings. First of all the evidence contradicts one of the most fundamental tenets of classical economics, namely that when we trade something (i.e., money) we must decide if the value of the trade is worth more than the future value of what is being given up. The Carnegie Mellon study shows that we’re not so much concerned about future utility as we are about the present pain of paying for something.

If you think about this in your own life it makes sense. When you are in a store and really want to buy something, the strong desire to possess the item can often override the more sensible (but abstract) idea of “I should save this money toward my long-term goals.” It’s the same principle when you have to spend a lot of money on something that is necessary (say car repair or health insurance). Even though you know it’s good for you (high utility), the pain of paying a relatively high price causes you to seize up with anxiety.

Let’s go back again to the prefrontal cortex for a moment. In this choice scenario, the prefrontal cortex is charged with being the mediator between the impulse for pleasure and the instinct to avoid pain. But this part of the brain has another vital function. It is one of the most important mood centers as well. Disturbances in the activity of the prefrontal cortex are linked to Major Depressive Disorder, Bipolar Disorder, and all types of mood dysthymia.

It makes one wonder how this part of the brain can execute its dual role. I’m no neurobiologist, but it seems like the “rational” function might be compromised when one is also in an affected mood state. I would venture to bet I’m not the only person on the planet who has ever tried to spend her way out of a bad mood.

The other implication of the study is that it explains why we love our credit cards, despite repeated demonstration that using them can be dangerous or even downright harmful to our economic security.

If when we buy something we’re choosing between pleasure and pain, then the biggest allure of charging something is that it removes pain from the equation. It obscures the anxiety of parting with actual money and makes the experience more abstract. After all, what is “future money?” Of course we will pay that off in the future! We always have the best of intentions about what our future self will do.

It’s only when debt becomes a problem that charging will once again engage the insular cortex in deciding a purchase. And then suddenly there is the desire for the product contending with the pain of parting with money and anxiety about how to manage the debt. Not a pleasant mood state to be in.

Studies like this one are incredibly valuable because they illuminate the process behind our most “irrational” choices. Hopefully as we better understand the fundamental workings of the brain, we can stop seeing ourselves as flawed beings for operating the way we do.