September 29th, 2009


A really odd way to build a new model of economic action...

As soon as fMRIs are super cheap, here is one way they can change things:

A research team at the California Institute of Technology (Caltech) recently conducted anexperiment in which a group of volunteers were offered an abstract public good. The price for the public good was fixed, but each group member would benefit differently from it. So how do you determine how much each person should pay? In this experiment, the researchers scanned the volunteers' brains using functional magnetic resonance imaging as the volunteers stated how much they were willing to pay. The researchers analyzed the fMRI images to obtain information about how much the person really valued having the public good, and then compared it with how much they were willing to pay for it.

The kicker was that volunteers whose measured value closely matched the amount they were willing to pay were charged less than people whose fMRI value was higher than the amount they were willing to pay. In other words, the folks who lied about how much the public good was worth to them were penalized by having to pay more than the people who told the truth about how much they valued the public good. As Caltech graduate student Ian Krajbich, who co-wrote the paper about the experiment for the online edition of the journalScience, put it, "The rules of the experiment are such that if you tell the truth your expected tax will never exceed your benefit from the good."

It didn't take many iterations for the volunteers to learn that honesty was the best policy, at least in this laboratory. The researchers said that once volunteers understood the penalty for lying, they told the truth 98 percent of the time.

As far as I'm concerned, the age-old free rider problem has been solved. Now all I need to do is drag my free riding neighbors into the nearest brain scanning center and make them pay up.