Tuesday, November 28, 2006

The Brain, Money, and Law & Economics

Complexity in the Field
By J.B. Ruhl

Money, money, money, money, money, money, money, money, money...

Right now, if researchers from the University of Minnesota and Florida State University are right, you should be feeling free from dependency and less likely to want others to depend on you. As reported in Science, Kathleen Vohs and grad students Nicole Mead, and (from U.B.C.) Miranda Goode have found that test subjects who are reminded of money prior to engaging in a word jumble descrambling exercise exhibit more self-sufficienct orientation compared to control subjects to whom neutral language is read prior to the exercise.

So what? Well, as the University of Exeter's Carol Burgoyne and Stephan Lea explain in a related article, "money is a recent phenomenon, with a history going back no more than a few thousand years, and the forms it takes across history and cultures vary widely. It seems unlikely that any brain mechanisms could have evolved in this time specifically to handle money, so there has been a tendency to treat money as a purely cultural phenomenon for which no scientific account can be given." But as we all know, money makes the world go 'round--it's hardly unrelated to human behavior. So Lea and colleagues recently developed a theory that behavior toward money is mediated either because money triggers brain processes related to the things for which money is exchanged (the "tool" explanation) or that it somehow triggers brain processes that act in potentially maladaptive ways (the "drug" explanation). The point is that these material explanations can be tested, which is what Vohls et al. did, and their and related research is producing "empirical results...show[ing] that behavior toward money is consistent and predictable, although not always what common sense or economic theory would predict."

Their deeper point is that emerging fields of study such as neuroeconomics, economic psychology, behavioral economics, and experimental economics have "driven back the orthodoxy that economics could best be studied by purely mathematical and theoretical models." Experimental economists such as George Mason's Bart Wilson, for example, are pursuing research that has profound implications for how humans approach trade and specialization. Mathematical and theoretical models can't push that ball very far without work like his.

Likewise, law & economics slowly hatched out of its theoretical shell to extend its reach into behavioral economics, but it strikes me as lagging behind the experimental and empirical research being advanced in other fields. Solid empirical law & econ/behavior work by legal academics, such as the type in which Jon Klick and Greg Mitchell engage, is still the exception, and experimental law & econ work is off in the distance as far as I can tell. Yet wouldn't research such as Vohs et al. have conducted on money be valuable to law and policy--e.g., informing consumer protection laws and even the trend in environmental law toward monetizing the environment?

As they say, just follow the money--or at least think about it!

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