Lehrer Is Not a Microeconomist

"Rational" vs. "emotional" is a useful analytical distinction for many purposes, but it's also done a lot of harm, leading people to believe that you can't have one with the other, or, perhaps more often, that others think so. Hint: When expected utility theorists model a decision as "U (A) = ....", it's not because they're so stupid to think that people walk around calculatin' all of the time. ("U (A)" stands for the utility of an action.) Nor do the makers of geographical maps think that whichever part of the earth their map represents actually looks like it does on the map. Those are models of reality, meant to have practical utility for whatever your aim is, such as finding your hotel or predicting human behaviour.

Along comes a post by Jonah Lehrer, the man who thinks neuroscientists should quote Proust more often (via). It starts with one of those boring descriptions of brain imaging studies:
Consider a recent study led by Brian Knutson of Stanford, Drazen Prelec of MIT and George Loewenstein at Carnegie Mellon. Not surprisingly, the fMRI experiment revealed that when subjects were shown pictures of an object they wanted - people were allowed to purchase things like a George Foreman grill, or a Napoleon Dynamite DVD - brain areas associated with anticipated rewards, such as the nucleus accumbens, exhibited a spike in activity.

But then came the price tag. When the experimental subjects were exposed to the cost of the product, their insula and prefrontal cortex were activated. The insula secretes aversive feelings, and is triggered by things like nicotine withdrawal and pictures of people in pain. In general, we try to avoid anything that makes our insula excited. Apparently, this includes spending money. The scientists speculate that the prefrontal cortex was activated because this "rational" area was computing the numbers, trying to figure out if the product was actually a good deal. The prefrontal cortex got most excited during the experiment when the cost of the item on display was significantly lower than normal. The insula, on the other hand, was most active when prices were higher than normal, suggesting that the function of this brain area when shopping is to keep us from getting ripped off. If we're used to see the George Foreman Grill priced at $49.95, the insula generates a stab of aversive emotion when we see it listed for $59.95. That unpleasant feeling is what keeps us from placing the overpriced object in our shopping cart.
So far, so unexciting. But then Lehrer comments:
As I note in How We Decide, this data directly contradicts the rational models of microeconomics. Consumers aren't always driven by careful considerations of price and expected utility. We don't look at the electric grill or box of chocolates and perform an explicit cost-benefit analysis. Instead, we outsource much of this calculation to our emotional brain, and rely on relative amounts of pleasure versus pain to tell us what to purchase.
We "rely on relative amounts of pleasure versus pain to tell us what to purchase"? This data directly confirms the expected utility model used in microeconomics. Lehrer's argument appears to be that because the decision-making process is emotional, it is not rational, and therefore models that can be represented as calculations, which presumably are rational, must be wrong. But your map does not have to represent the road in its actual colour for you to find your hotel.

P.S.: I have not read the original study. I'm criticizing Lehrer, not Knutson et al.

P.P.S.: The post is also an example of a journalistic tactic I particularly dislike: Introducing a topic with an angle that's supposed to make it relatable for the reader, but which is actually irrelevant for the argument. In this case, we are first given a lengthy treatment of a retail chain called Costco, including Lehrer's personal experience in their stores, despite the fact that the brain imaging study (as Lehrer describes it) has nothing to do with Costco in particular. Sure enough, the comments section is brimming with people's views on that chain.

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