Page 1 Behavioral Economics and Neuroeconomics The field of Economics seeks to explain human behavior through modeling, empirical

data, and recently, experiments. Economics is based on the emphasis that rational people strive to make themselves better off (or at least minimize losses). Given this, selfless acts seem irrational, and should not occur given real-life incentives. How can we explain why people not only put their money, but their livelihoods and bodies on the line for other people or for the greater good? Despite the assertion of rational mans profit-maximizing approach, altruism is ubiquitousi. To better understand the psychology behind the science of economics, Behavioral and NeuroEconomics, subsets of traditionally micro- and macro-economics, have been founded. Behavioral Economics studies the effects of social, cognitive and emotional factors on the economic decisions of individuals and institutions, and the consequences for market prices, returns and the resource allocation (Wikipedia, Behavioral Economics). In short, Behavioral Economics is a tool used to explain how individuals use their economic power (in monetary terms) to influence the world around them. Have you ever had a bad shopping experience or bought a defective product, and decided that you were never going to shop at that store again? Instead of seeking legal counsel, returning the item signals to the company that their product is undesired. The measurable loss of profit due to decreased demand given a change in tastes and preferences is a direct signal from consumer to supplier. To maximize profits, the supplier must decrease his production scale to match the pace of consumption. Similarly, Neuroeconomics combines behavioral economics with cognitive and social psychology. Neuroeconomics can explain in which occasions it is profitable for parties to cooperate. In the classical example of the prisoners dilemma, parties act without knowledge of the

others actions, and can decide to either cooperate or tattle on their partner in crime. If they tattle, they are set free and get their partner in bigger trouble. If they keep mum, they are punished no matter if their partner tattles or stays quiet. Despite the partner in crimes actions, it is always best, and profit-maximizing, for each party not to confess. This is called Nash Equilibrium. Over the course of a typical game, individuals tend to prefer mutual cooperation even though defection would lead to a higher overall payout. This suggests that individuals are motivated not only by monetary gains but also by some reward derived from cooperating in social situations.ii (Wikipedia Nueroeconomics). This explains why students refuse to rat out cheating classmates, even if they would receive a higher grade by reporting the transgression. Socially, there is an instinct to cooperate, even if there is no empirically measurable individual gain. Both Behavioral Economics and Neuroeconomics can be seen in the real world, as well as literature like Cory Doctorows fictional novel For the Win. Part of Doctorows For the Win follows groups of workers striking in unison for better living standards. In doing so, they threaten not only their incomes but also their physical wellbeing. According to rational-behavior assumptions within the Neo-Classical economic approach, there is no explanation for someone risking more than they personally stand to gain (except by labeling them an exception, risk-seeking and irrational). However, Behavioral and NeuroEconomics explains why these supposedly irrational people act selflessly in their attempts to better not only their lives, but the lives of underprivileged workers around the world; and furthermore, explains how they stand to gain not only financially, but emotionally by collaborating to be a part of a greater good. Like the prisoners dilemma, striking and subsequently losing pay, is not the profitmaximizing (and therefore rational) choice. To an economist, any increase in profit is better than

none. The Characters in For the Win are willing to die for their cause, and many of them did in fact lose their lives at the final battle. By giving the reader insight to his characters thought processes, Doctorow manages to squash any fear that a selfless acts must be rooted in some form of personal gain. By doing so, the reader comes to understand that the characters feel there is much more at stake than their own personal, almost insignificant, futures.

How Behavioral and Neuroeconomics Work in Our World In For the Win, Doctorow specifically states his hope that readers of this book will be inspired to dig deeper into the subjects of behavioral economics (and related subjects like neuroeconomics) and to start asking hard questions about how we end up with the stuff we own, and what it costs our human brothers and sisters to make those goods, and why we think we need them (Doctorow, 2011). While behavioral economics infiltrates various facets of irrational behavior, lets focus on the aspect of selfless acts. Actions motivated by improving the worldat-large and/or other people may seem irrational by Neo-Classical Economics standards, but in fact, are arguably completely rational. The individual stands to profit indirectly from engaging in the world. By taking action for others, like raising the standard of living, fighting for equality, protesting, etc., the individual grows their positive personal virtues, and possibly financial standing. It is difficult to think that one person can make a meaningful impact on the world. In fact, the grim reality is that the average personal has little weight in the matters of economics, politics, and other mass-centered social constructs. Nonetheless, the individual can influence the collective through economic means. Purchasing a good or service signals to a supplier there is a demand for their good or service. By paying, a consumer not only engages in a value transfer, but also supports

the expansion of a company. In For the Win, we see this phenomenon when Connor Prickel engaged in his virtual economy. And now the markets were running and everything was shooting up in value (63). In the incipient stages, the value of his goods was worth very little. There simply was no demand for his supply. Over time, as the market grew and a greater population of consumer grew, his profits increased because he could now charge more per unit sold, and he could increase his profit margin by decreasing his costs. Clearly, the size of market greatly affects the demand and profit a firm generates. In a large-scale economy, individuals vote to support companies on a daily basis. While the overarching sentiment may be grim about changing an entire market, inactivity is always worse than trying. For the individual willing and able to abstain from supporting an unsavory company, affecting the company s bottom line is the easiest and most sure-fire way to amplify his voice. Vegetarians are prime examples influencing market practices. While there are varying motives protesting the consumption of meatreligious, health conscious, moral, environmental, etc principlesabstaining from purchasing meat ensures a company fundamentally contrary to the vegetarians ideals is not supported by their hard-earned dollars. Furthermore, as Doctorow points out, Sometimes (often!), you need to organize to make a difference (1). Given this, if a second person becomes a vegetarian, then the net effect on the company would increase. The company would lose two times the profit. Because this is not an exponential decrease, merely marginal, each additional person has an equal effect as the prior. In this sense, each person has an equal vote in allowing animal farming to affect the world we live in. Needless to say, collaborating to unite opinions and bolster support would be ideal in order to create a large-scale market transformation. The Necessity for technology in the Quest for Change

While abstaining from purchasing a good or service is a method to influence the market on a small scale, large changes are made when people unite and actively protest. By protesting, a persons ideologies can spread and influence other peoples behavior, in psychology, this effect is called contagion. Therefore, a protest gives rise to opinion-leaders. Traditionally, a persons capability to influence was directly proportional to their wealth and social status. In todays age, there are arguably more chances for the average person to influence the masses simply because platforms like the internet are more readily accessibleiii. Similarly, in For the Win, Doctorow frames the media as an opinion leader. Oh come on, Leonard said. There's no such thing. I can show you the research papers. Game addiction? That's just something they thought up to sell newspapers (2). The mirror image to leaders is followers. People who follow leaders look to their leaders to judge their own actions. Opinion leaders have a lot of market influence, because others respect their stances. In fact, American consumption is based on not only our own opinions of products/services, but even more so on how we believe our peers will judge our decisions. For example, brands like Jif exploit this notion with advertisement campaigns like Choosy moms choose Jif. In this instance, a consumer s decision to buy Jif peanut butter is not based on empirical evidence like nutritional information. Instead, reason and logic are replaced by fear of social stigma. Furthermore, by merely abstaining from purchasing an item, the consumer attempts to reform a market without truly informing the company as to why they are jumping ship. Yes, companies feel the sting of a diminishing profit margin; however, their practices will not change if they do not understand why their demand is decreasing. For example, if a group of people stop shopping at Nike when information about their unfair labor practices is leaked, Nike would notice

a decrease in sales. However, this would have no effect on their employment of sweatshops because they do not know the reason for the change in sales. It could simply be explained by a poor marketing campaign or loss of sponsors. In any case, not buying a companys products may in fact force the company to employ even more unethical practices in order to make up the lost profit. To really change a companys fundamentals, active, collaborative protest from citizens is necessary. In todays world, as mentioned earlier, more platforms exist for opinions to be heard. Technology makes becoming an opinion leader easier. Finding a group of people with common goals is easier following the introduction of search engines and social media. By using technologies such as online games, e-mail, tweets, radios, and other mediums, the characters of the For the Win were able become opinion leaders, amass a following, coordinate efforts, help each other, and amplify their message in one large voice. Doctorow uses his characters in For the Win to make this point. But instead of using money to change a companys business practices, the characters strike and host sit-ins. Moreover, it is easier to attack an organization through such mediums. Recently, McDonalds controversial advertisement asserting their chicken nuggets are as safe as petting a pit-bull caused a backlash. In protest, someone created a Facebook page to bring attention to the ordeal and reach a broad audience. To date, the page has accumulated 13,870 likes. This act was purely selfless since the page owners incentives could only be pride and maybe brownie points (unless it was a competitor under a fake account). The public outcry was instantaneous, loud, and could not be missed. To give a sense of magnitude, pit-bull activists even threatened to boycott McDonalds. In response, McDonalds quickly pulled their ad and issued an apology. Given technology and our previous assertions, the ability to influence the world-at-large is no longer contingent on economic status. Doctorows novel For the Win reads as a call to action

within a call to action. Leading by example, Doctorow shows how someone can lead a community as an opinion leader, and the importance to societal advancement of non-monetary gains, as well as making it ok, even rational, to sacrifice for the greater good.

Bibliography:

- Contributors, Wikimedia. "Wikipedia." Wikipedia. Wikimedia Foundation, 15 Mar. 2012. Web. 14 Mar. 2012. http://en.wikipedia.org/(Wikipedia was used for a range of definitions and links) - Doctrow, Cory. "For the Win." For the Win. Cory Doctrow. Web. <http://craphound.com/ftw/Cory_Doctorow_-_For_the_Win.htm> - Freakonomics. "Altruism Alert: Just Ask." Freakonomics. Freakonomics, Llc., 23 Sept. 10. Web. 15 Mar. 2012. <http://www.freakonomics.com/2010/09/23/altruism-alert-just-ask/>. - Yahoo Research Labs. The Power of Asking: How Communication Affects Selfishness, Empathy, and Altruism. Journal of Public Economics. 15 Dec. 10. Web. http://econ.ucsd.edu/~jandreon/WorkingPapers/AndreoniRaoAsk.pdf - "Pit Bull's Against McDonalds." Facebook. Pit Bull's Against MCD. Web. <https://www.facebook.com/PitBullsAgainstMCD>. -"Prisoner's Dilemma." Stanford Encyclopedia of Philosophy. Stanford University, 22 Oct. 07. Web. 15 Mar. 2012. <http://plato.stanford.edu/entries/prisoner-dilemma/> - "Neuroeconomics: Money and the Brain." Brain Briefing. Society for Neuroscience, Feb. 2010. Web. 15 Mar. 2012. <http://www.sfn.org/index.aspx? pagename=brainBriefings_10_neuroeconomics> - Tierney, John. "The Altruists Paradox: Should It Hurt to Be Nice?" TierneyLab. NY Times, Jan. 07. Web. 15 Mar. 2012. <http://tierneylab.blogs.nytimes.com/2007/06/18/the-altruistsparadox-should-it-hurt-to-be-nice/>.

i In the real world, economists have proven that altruistic motives are never purely altruistic. While this seems to undermine this essay, it is important to note that the essay has always maintained that benefits from unselfish motives are not purely monetary. Furthermore, as expanded in following sections, Doctorows narrative allows the reader to see the characters thought process, and therefore ascertain the goodness of their claims. It is not like this in real life. In real life, economists have shown that children who stand to receive a large inheritance visit their parents at retirement homes more often than those who do not stand to gain such a large sum. http://www.nytimes.com/2009/10/20/opinion/20freakonomicsexcerpt.html?pagewanted=all. ii i The exception to this principle is the end-round phenomenon. In this instance, both parties know that there will be no future collaboration. Therefore, it is profit-maximizing for one party to defect in order to receive a bigger payout while the other one suffers. The quality of relationship is no longer relevant. iii While it is important to have differing opinions to advance society through discussion, it is also important to note that fundamentally, not all opinions are correct, and not all opinions should have equal weight. The rise of technology has enabled and emboldened (through anonymity) more users to voice their views on matters. While this has obvious positive influences on societylike improving communication, strengthening community, pooling resources, knowledge spillover, etcthere are many dangers to giving equal opportunity for voicing opinions. Some critical reflection may be detrimental to society.