When you say bubble, I think of the things that float. But when Jonah Lehrer, author of The Decisive Moment, says bubble, he means microeconomic bubbles (disclaimer: I know nothing of economics, so if I misrepresent something economic, I am very sorry). To my limited understanding, economic bubbles occur when trade of products or assets occurs at highly inflated values. Lehrer writes of Reed Montague, a neuroscientist at Baylor University, who studies the neuroscience behind bubbles.
Montague studies how people make decisions about the market. Thus, his experiments involve participants that trade with real scenarios of the dow jones and he measures their brain activity while they make such decisions. Montague’s work involves dopamine, no doubt. But the really interesting observation he makes revolves around the scenario where the market continues to rise and dopaminergic neurons began to fire less than they had initially. Lehrer commented that the dopaminergic neurons were acting like an “internal thermostat” as they turned off when the market started to escalate. However, in other neural circuits of the brain – most notably the reasonable prefrontal cortex – the thermostat idea does not apply. Thus, “our primal emotions are acting rationally, while those rational circuits are contributing to the mass irrationality.” Montague states that those investors who listened to their dopamine levels would earn more money than typical subjects because they would get out of the market before it would be too late.
It is interesting how dopaminergic neurons are typically associated with impulsivity, and apparently we do not seem to give them enough credit. I understand that this research implicates a lot of caveats, but I also wonder where this impulse is coming from. Are our dopamine neurons smarter than we are? Where do they synthesize the information that contains some key to success?
This gives rise to an interesting concept: with our society growing, and technology booming, neuroscience is finding its way into many different fields. Now, there is even a word called “neuroeconomics.” It seems as though neuroscience has an interesting future filled with insights on how the mind works in highly specific situations.