Behaviorl economics.pdf

Summary of Chapter No.5 of my book: Economy COGNITIVE BEHAVIORAL: enigma of choice. Author: Prof. Dr. Francesco Greco Generation of the decisions: interactions between controlled systems and automatic and between systems cognitive and emotional The role of emotions in decision-making processes, finds confirmation in the analysis of brain activity: the emotional systems, as well as automatic ones in fact represent a fundamental contribution in the formation of the decisions on the part of the consumer. In addition to some experiments show that a malfunction of the emotional systems does not allow the decision-making system to work autonomously. Interesting aspect, especially in the context of the traditional methods of marketing (focus group and interviews) is the function performed by the deliberative system. This system is in fact responsible for the rational justification of the behavior and by neuroscientifici studies showed that it is not able to exert its influence on the decisionmaking systems that take place below the level of awareness, but on the contrary, in justifying the behaviors performed by the subject, amplifies the importance of the processes that is able to manage, thus providing a justification not objective of what is happening in the brain. Accordingly often behaviors triggered by automated systems or affective, are interpreted by the subjects as the product of a rational reasoning. Within the decision-making processes there is therefore a contradiction between the controlled processes and automatic and that 1 between reason and emotion.1 The controlled processes have a sequential logic and are managed by the subject in the moment in which there is a change or an alteration of the current situation.2 These processes are activated at the level conscious and are associated with a cognitive effort on the part of the subject. Being processes that occur in a conscious way, the individual has an introspective access thereto and is thus able to reconstruct the steps that lead to the choice or to the final behavior. In this case therefore, the classical models of the economy are suitable to the analysis of the decision-making process. Automated processes instead, unwinding usually below the level of conscious awareness of the subject, occur in parallel and does not involve any subjective effort. These processes contribute to the formation of opinions and attitudes that are beyond the control of reason, the latter in fact succeed in a second time by means of the controlled system, which uses the rationality and logic to support such a judgment or attitude that has however origins much deeper. Automated processes and those controlled are distinguishable at the level of the brain areas, with reference to the place in which arise within the brain.3 In automatic processes cognitive found an activity at the rear, upper and side of the brain, while automatic responses emotional have their origin in the amygdala, structure which is part of the limbic system, involved in the management of emotions (e.g. fear and anger). In general the automatic processes constitute the majority of the electrochemical activity of the brain and represent its normal operation, they are constantly active (even during sleep). On the contrary the controlled processes are activated at particular moments, normally when the individual has to cope with a change, an unexpected event or take a decision to resolve a Problem, in this case in fact the automatic processes are terminated to give space to the controlled processes. In addition to the distinction between controlled systems and automatic, there is the one between the emotional processes and cognitive ones. This distinction has ancient origins and it is important both in neuroscience that in contemporary psychology. Cognitive Processes can be defined as those which correspond to the true or false question while the emotional processes motivate the acceptance or refusal4 and also (Schneider, Shiffrin, 1997) (Hastie, 1984) 3 (Lieberman et al., 2002). 4 (Zajonc, 1998) 1 2 2 comprise the emotions (sadness, anger, shame) and the so-called " biological affections" as hunger and sexual appetite.5 Knowing that the continuous interaction between the systems controlled and automatic and between those cognitive and emotional determines the behavior it is important to analyze the aspects that guide this interaction. Between the different systems there is in fact a collaboration in maintaining a balance between the decision-making processes of automatic and/or affective with serial ones and cognitive, this means that if the cognitive system decides to work in an autonomous manner, it will be forced to fail. In addition to the collaborative aspect there is also the competitive aspect: trials are often emotional and cognitive those competing for the control driving behavior toward conflicting directions. Finally another important aspect concerns the awareness with which the individual takes consciousness of collaboration and competition of these processes and behavior itself. Economic theories are based on the assumption that the decision-making processes of economic agents are only the result of cognitive processes controlled, such theories should integrate the evidences that emerged in the field neuroscientifico which confirm the existence automatic processes and controlled using both the cognitive dimension that emotional. The generation of any decision by the purchase of a product to choices more problematic, activates a complex neural network and gives rise to a processing of information affectable by external factors, sensitive to the complexity, influenced by the time of the subject and on many other variables. The discoveries neuroscientifiche therefore have a major impact in the study of the behavior of the consumer and the marketing where to integrate such knowledge to understand how consumers take decisions in order to maximize, obtain or consolidate the benefits that derive from the interaction with goods or other subjects. The models of choice of economy based on rationality and the optimisation of the costbenefit ratio by which we motivate our actions, are at least not exhaustive in describing the complexity of the real decision-making processes of consumers. The economy is a highly complex system. The substrate of the economic system is formed by people in their capacity as consumers, workers, managers, etc. These items are then joined together and form the different hierarchical levels intermediates, up to reach the complexity and the 5 Buck (1999) 3 organization of the entire world economy. The method of decision making of man is extremely more complex than any living organism on earth. We can say that the behavior of natural systems are based on fixed rules, while those of society, people, act on the basis of planning and future prospects; in this way the system state influence its same behavioral rules. The notion of choice presupposes that there is the possibility of alternative actions, namely that the agent in question is not obliged to act in a predetermined manner, because thus obliged by natural forces (as in the physical world), by instincts (in the biological world), by coercive desire (in societies schiaviste), or by assumption. In this case the choice degenererebbe in an action required: i.e., the set of actions including the agent can choose would be composed of a single element. A theory of choice would not false, but irrelevant to describe/explain the action. (However, even these predetermined actions can have important economic, for example, may generate demand for goods. Therefore, economic theory includes, in general, even these degenerate choices). The hypothesis that the actions are chosen presupposes not only that they are possible alternative actions, but also that there is a criterion of choice, for example the pursuit of an objective. Without a criterion for selecting the action is undetermined, can be any, taken for example in the case between the alternatives (however, the random action in certain cases may be a deliberate choice). The selection criterion for an agent is associated, in the economic analysis, to preferences on all actions and are these preferences that reflect the end, or connection, the agent. The theory of choice is in economy quite complex and varied, especially in relation to the stock options to choose from, so it is worthwhile to distinguish different types of choice to analyze them separately. There are social decisions "easy", in which applies the rational process of economic calculation, and there are choices "difficult", involving life and death (use some forms of coercion within its own territory, go to war, militarily intervene in a genocide), or vital goods (check a source of water or the foreign debt of a developing country, allocate a kidney transplant or food in a famine, manage a nuclear risk or global climate change), or goods identity (to be able to pray publicly a god, wear or less the veil, allow abortion or artificial insemination). It defines "choice tragic" that as it happens for life, the vital goods and goods identity - "is born from the conflict between the values that you say in an absolute manner, in the sense that it does not admit compromises". When the choices are tragic, efficiency is no longer the sole criterion for the allocation of resources. There is not an optimal solution, but "only an oscillation from a solution 4 that is compatible with certain values and incompatible with others, to another solution in which the situation has changed or overturned"67 . This cyclicality, for which in each moment of our existence we pursue certain objectives, which then replace with other flows from intrinsically character of choice. . The point can be effectively expressed by mentioning the known dilemma of the donkey, improperly attributed to the logic of the XIV century Jean Buridan. It circulate two versions, meaning from radically different. The first widespread, tells that the ass, failing to decide whether to eat the forage or hay, dies of hunger. Here we have a subject that aspires to maximize your pleasure, but that, placed in front of the options very similar, must commit to refine its assessment with a commitment that, in the meantime, succumb. To provide some element of response, it is appropriate first to distinguish between the pre Decision-making, where the alternatives of the "tragic choice" remain in conflict, and phase Post-decision making in which - as the donkey who thirsts while filling the belly of forage the sense of the choice made translates into regret, insecurity and uncertainty, need in respect of the option ignored. The American psychologist Elliot Aronson stated that " the conflict between two opposite knowledge produces a psychological condition of inconsistency (cognitive dissonance). This inconsistency is a state of mind in which we find ourselves to oscillate between ideas, moods,beliefs and opinions. This condition produces a discomfort to the psyche,a discomfort that may go from a vague annoyance to a profound anguish. This is the moment in which the brain triggers the mechanism of self-defense: it is here that intervenes what is defined as the adjustment.8 The attitude, we can also say, incorporates the assessments that individuals give of themselves , of others, of events and social goods. The theory of dissonance came into the scene suggesting that it was more effective to alter their behavior. When people were found to interact on a close base and equal status with those toward which were entitled to entertain prejudices, we would have had a good chance that the ancient attitudes would be appropriate. Several field experiments and laboratory as well as the history of segregation, confirmed this prediction"9 [Gerelli 1993, 22] [Gerelli 1995, 77] 8 The adjustment is a mechanism of self-defense that uses the autogiustificazione as an operational tool allowing the brain to recreate the conditions of cognitive assonance and then delete the member of discomfort of the psyche,from vague discomfort to the profound anguish. 6 7 9 [Aronson 1992, 305; 1997, 131]. 5 And as a crossroad that presents itself in every moment and in which we decide where to go. The big decisions instead, those that put us in difficulty, often come because we have not taken previously many small decisions. All this signifies that our source element are the small decisions not taken, or taken in the opposite direction from where they wanted to go. Recent discoveries in neuroscience have demonstrated that the majority of our decisions are not taken at the Rationalized level but at an unconscious level. Therefore it can be inferred that if our decisions are not the fruit of rationality we must assume that the main problem is caused by the mental programming that provides information distorted. Information which play a decisive role in our choices and have the power to influence so important to our life.10 The main sources of programming of our brains are: culture,media , others and ourselves and the stories that we are inventing. Each of these sources can help to create our way of thinking, to be, our ideas and our perception of who we are. Our consciousness is the result of all the information that we have accumulated in the course of our existence. The problem is that we do not know what we do not know why the mental program, once installed, are performed automatically and reside at the level of competence unconscious. The ability to make the right choice, resides in the knowledge of these mechanisms and the ability to use them to their own advantage.11 Another factor to consider in the process of choice is the emotional. The emotions they create in our solid brain synapses (mental programs) also in only once and then recalled in an automatic manner. To generate an emotion able to program the brain instantly is not necessary the occurrence of major disasters or traumatic. Is not the event itself but as it is lived. Every time we take a small decision,we are doing something more than what we believe. In that precise moment, we are selecting one among the infinite potential future already present in every moment.12 Fortunately the brain that is a perfect machine,has the biological capacity to reorganize its content, i.e., delete the old synapses and create new ones. Any synapses (mental program) is biologically reversible: this phenomenon is known as "neural plasticity" (Neuroplasticity).13 Mental programming is understood to mean the whole of our knowledge acquired in the course of our existence that reside in the unconscious and these are associated beliefs , educational systems and affective components. All of this constitutes a sort of programs installed in the brain that determine the type of atteggiameno that we have when we are faced with a choice. 11 According to Carl Gustav Jung:" Make conscious unconscious, otherwise it will be the unconscious to guide your life and thou shalt call destiny". 12 Small initial variations in the initial conditions cause large variations in the long-term behavior of a system. Chaos Theory.>>> 10 6 Suppose to be subjected to a task that appears to us to be boring and frustrating. Subsequently we induced - with incentives of various kinds (moral or materials, either positive or negative) - to convince others to do the same task. We need to make them believe that this is an activity stimulating and enjoyable. For some of us it is proposed a fee of 100 euro; others to 10 euro. According to the theory of "forced complacency", in this situation the person, if cannot refrain from behavior required, experiences a state of dissonance that will seek to reduce by modifying its cognitive framework, and more precisely by adapting their attitudes to the behavior that is located to support. The lower will be the incentive that is used to push the person to this Agreement, the more the "behavior" thereto associated Most High will be the state of dissonance that she test; the higher status of dissonance, much deeper will be the change of attitude that will manifest itself. It also affects some versions of purely economic paradigm, according to which an individual performance can only improve with increasing incentives that the subject itself currency as positive: here instead who is paid more ago worse. Finally, it relativizes the settings centered on the effect crowding out, according to which a right behavior from intrinsic motivation is weakened if it is paid as if it were inspired by extrinsic motivations.14 In fact we are in front of a behavior that, to reduce the cognitive dissonance, becomes, by a adapt the attitude, a sort of "second nature" for the individual: this implies that the intrinsic motivation are not attenuated or destroyed, but change and intensify "only under the influence of extrinsic incentives (positive or negative)". 15 If the choice is between something that the person likes and something that regret. Some doubt arises when the choice is between two options that love both and toward which the preference is relatively slight. The question becomes difficult and interesting when the alternative proposals are complex, each including aspects pleasing and unpleasant, or when the person decides without being certain results that will receive".16 In turn, the "tragic choices" are the most difficult between the hard choices. They, as happens for version less note of Buridan's Ass , may entail that, while accessing a desired alternative, I am nevertheless devoid of other dimensions, equally decisive for my playing physical and social. Plus a choice is "hard" or "tragic", more it affects my personal purposes: My Profile identity, the image with which I represent to others and for whom I have expectations and hopes. to ability of the nervous system to change the Neuroplasticity is understood mean the relationships interneuronali (synapses),to establish new and eliminate some. This property allows the nervous system to modify its structure and functionality. 14 [See , for all, Frey 1997] 15 [Hirschman 1994b, 223] 16 [Restle 1961, cited in Festinger 1964, 2] 13 7 The modeling of the interactions between the various economic actors can be enhanced by taking into account also the emotional characteristics of economic operators and consumers. To study the operation of the system emotional it should be noted that human beings have evolved to survive and reproduce and not to be happy. This concept allows you to understand an important phenomenon by which the body pursues this objective: the homeostasis. The homeostasis can be defined as a process aimed at maintaining a balance of the state of the body, there are in fact of the detectors that manage a control mechanism and balancing of the body when it comes to fail. In fact, in the case in which this balance is lost you trigger mechanisms that require voluntary actions and not, in order to redress the balance. It may happen that this phenomenon occurs entirely in a manner unconscious by unintended actions, or through actions aware as for example the action of wearing the jacket when we feel cold. Is the brain that directs us in the execution of actions that aim to restore the state of the body back into balance, through a mechanism that on the one hand creates pain or unpleasant sensations and on the other hand gives pleasure. In fact when we lose the equilibrium point we have negative feelings and unpleasant, for example feeling cold impels us to undertake actions that allow you to restore the balance (the jacket). The process by which they are born the actions that show the status of the body in balance instead, is called allestesia and active in the individual pleasant sensations. The phenomenon of homeostasis in human behavior flips the classical concept of economic behavior that provides the preferences as a point of departure for the implementation of a behavior which represents the point of arrival. On the contrary, the neuroscientifico approach considers the behavior not as a point of arrival but as one of the many mechanisms with which the brain pursues objectives of equilibrium (homeostasis) and preferences as variables of passage which guarantee purposes of survival and reproduction. According to the perspective neuroscientifica the economic model, assuming that individuals act for the purposes of optimising their preferences, begins at the end of the model neuroscientifico. The Pleasure, judged by economics and marketing as an objective to be pursued, becomes for the theories neuroscientifiche an information signal that the brain uses as a resource in order to preserve the balance of the body. 8 The sensitivity of the homeostatic systems to the variations of the variables to be monitored for the balance, prevalent with respect to their static levels. This means that the mechanisms that regulate the process of homeostasis, are triggered exclusively due to a change or an event that changes the level of the variables to be controlled. The Neural sensitivity to change demonstrates how the man is attracted more by the variations of revenue or wealth rather than by their level, gambling for example is included in these logics. Moreover another fundamental aspect that greatly affects human behavior are the expectations, they may cause cause powerful emotional responses. The search for pleasure and escape from the pain are considered by the economic models as the motor that drives the individuals in the choice between different alternatives. The theories neuroscientifiche instead suggest that the execution of an action is not exclusively correlated to an object pleasant. The decision-making processes are in fact constituted by two separate systems: a system is involved in the management of pleasure and pain while the other is responsible for size strong-willed. For a long time the theme of emotions has not been the subject of scientific research because of the apparent complexity of measurement and detection of cerebral phenomena involved in the perception of emotions. Moreover the emotional dimension, being strongly individual subjective and is difficult to assess and compare between different subjects. The best method to be able to investigate the emotions is to divide them into two components: the first component is represented by the emotional state indicated by the alteration of the physiological parameters for the work of the autonomic nervous system (blood pressure, answers neuro-hormonal, etc.). The second component relates to the sensations (or feelings) generated by the emotions in the central nervous system. 17 The neuroscientifici studies have shown that the the prefrontal cortex plays a fundamental role in the context of cognitive systems involved in decision-making processes. The the prefrontal cortex is positioned in front of the frontal lobe and the regions drive and premotrici, this area is in close connection with the regions under-cortical (including the The limbic system), other cortical areas (somatic, visual, aural) and the regions involved in motor activity (thalamus, basal ganglia). 17 (Kringelbach, 2004) 9 In summary, the prefrontal cortex seems to be involved in cognitive functions that relate to: the inhibition of a response, the estimation of the duration, the maintenance of the Attention, the advance, searching in the memory, the evaluation of reward and punishment, the planning and the implementation of a plan, the reasoning, the decision-making, the treatment of the sequences of events, adaptation to new situations, the orientation of the behavior, Conceptualization 18 The bark orbito-front which was found to be a focal point of convergence of the sensory information received by the individual. Within the cortex orbito front- in fact the sensory information are integrated between their generating: an activation of the reactions of the autonomic nervous system (autonomic reactions), an involvement in learning and finally the decision by the experimental subject 19 This bark is rich of anatomical connections in what belongs to the neuronal networks that include the regions of the prefrontal cortex, amygdala, hypothalamus and the dopaminergic systems. The important existing interconnection between these areas and the bark orbito front- suggests to neuroscientists that the bark is involved in the processing of emotional stimuli. The bark orbito-frontal therefore seems to be the brain area in which takes place the important integration of experiences sensitive and their emotional processing. Moreover scientific studies have highlighted the role of the bark in emotional disorders such as drug addiction and other emotional disorders such as depression. In the front part of the bark instead is evaluated from the subject the value of reward attributed to reinforcement (incentive) proposed to subject to the execution of a behavior: this assessment may be influenced by various emotions such as anger, fear or other internal states. The value attributed to the reinforcement è Therefore capable of influencing the behavior of the subject and also the behavior in question can also be stored for the learning of new behavioral models. During this process you determine flows of bi-directional information between the different regions of the cortex orbitofrontale and other brain areas. The intense activity that occurs between the Bark and Bark cingolare is managed by conscience, which succeeds to evaluate the affective valence of sensory stimuli perceived by the subject. 18 19 (Graziano, 2010). (Ullsperger et al., 2004). 10 Another important aspect is the sharing between the bark orbito-front and the other cortical regions of a high number of neurotransmitters and neuromoderatori of dopaminergic systems. The receptor systems related to dopamine play an important role in the generation of the responses of the body relative to the emotions and the pleasant experiences linked to the positive reinforcement of a reward. Thanks to the technologies of brain imaging was observed the activation of this cortical area in correspondence with the generation of positive reinforcements abstract as the Gain of money and status symbol (in addition to rewards more concrete such as the gain of food). The marketing in the implementation of the communication strategies, often uses these types of reinforcement as a lever to encourage the consumer to purchase or for the creation of a positive attitude toward the brand. In fact some brand contain in themselves a high value of the reward that is highlighted at the cerebral level by a stronger activation of the cortex front orbito than it is with unknown brands . 75 These mechanisms may therefore be an aid for marketing in planning strategies that relate to the novel products. For further information on the subject and on the book contact the author at the following email address: grecofrancesco69@gmail.com. 11