Brain-Scan Study Rewrites Economic Theory -A Galaxy Insight
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February 19, 2009

Brain-Scan Study Rewrites Economic Theory -A Galaxy Insight

Presentationzenbook_2 “Not what we have but what we enjoy, constitutes our abundance.”
~ Epicurus (Greek philosopher, BC 341-270)

Trying to keep up with Joneses? Why is having “enough” never quite enough for those of us living in the “rat race” of urban ideals? In an interesting new study of how money motivates, brought to us by the University of Bonn, researchers discovered that humans don’t just want “more”—we want more in comparison to others. This relative sense of “more” appears to play a much larger role in motivation that previously suspected.

These findings support previous research by Andrew Oswald of England's Warwick University and David Blanchflower of Dartmouth College who found that even if our own incomes are rising, we tend to become less happy if the incomes of others are increasing more in relation to ours.

The Bonn researchers used brain scanning to show how much we as humans take others' earnings as a measure of our own success. The study found that whether or not people made big paychecks, for example, was less of a motivating factor than whether they made MORE than their coworkers. In other words, winning the arbitrary “competition” appears to be more important than the reward itself. Which may be why Donald Trump is so fond of saying that money is not a motivation for him “except as a way to keep score.”

Consumerism_2 But for the first time, we have hard evidence for this phenomenon detailed in a series of experiments conducted by economists and brain scientists at the University of Bonn. They tested male subjects in pairs, asking them to perform a simple task and promising payment for success. Using magnetic resonance tomographs, the researchers examined the volunteers' brain activity throughout the activities. Participants who got more money than their co-players showed much stronger activation in the brain's "reward center" than when both players received the same amount. Details of the study from the study were published recently in the journal "Science".

"This result clearly contradicts traditional economic theory," explains economist Professor Dr. Armin Falk. "The theory assumes that the only important factor is the absolute size of the reward. The comparison with other people's rewards shouldn't really play any role in economic motivation."

But that’s not at all what the researchers found. They found it’s not as much what we have, as what we have in relation to others that appears to matter most. This may partially explain the unprecedented and ballooning levels of consumer debt in the “westernized” parts of the world.

This interesting phenomenon is detailed in the book "Green with Envy: Why Keeping Up with the Joneses is Keeping Us in Debt" by journalist Shira Boss. The book is full of interesting case studies of people with hollow lives revolving around “looking” full—particularly in relation to others. "How we fit in and how we measure up are such an integral part of our financial well-being," she says. "We construct a fantasy world around those who have more money, and glorify their lives."

Boss' personal journey into covetousness started with her next-door neighbors, John and Tina, in her New York City co-op, who appeared to enjoy the “perfect” life. Rumor had it that they paid cash for their posh apartment. They liked to spend time “antiquing” upstate, jetting off to exotic locales on frequent vacations, and ordering a steady stream of luxury items that piled up at their door. Boss become mildly obsessed with how wonderful her neighbor’s lives appeared to be in comparison to her own seemingly less glamorous existence.

With her husband unable to find work and eventually returning to business school, Boss’ household had to rely solely on Boss’ income as a freelance writer. As Boss experienced the anxiety of hiding their financial stress from family and friends, she become intrigued by her state of envious frustration and decided to write a book focusing on the social psychology of money—the relationship between the household and the outside world. As part of her research, Boss asked her neighbors for an interview. What she found out was more than a little surprising. The grass wasn’t quite as green as it looked across the fence. Tina was unhappy with her career, and had racked up $21,000 in credit card debt without telling her husband, for instance. Their apparent “success” was mostly due to money given to them from their families, which for them was a point of embarrassment and something they tried to conceal from friends, among other eye-opening revelations.

Boss found similar stories from working-class couples to congressmen who couldn’t really afford their lives (some sleeping on cots in their congressional offices) to baby boomers who fear they will never be able to retire.

"We convince ourselves that our problems are ours alone, and we spend so much of our time hiding our angst, which causes more stress," says Boss. "What I learned is that everybody struggles with issues around money, nobody is completely happy and comfortable—and knowing that is a huge relief. We feel less alone."

While it is nice to “feel less alone”—to know that everyone else on the planet is crazy too—wouldn’t it feel nicer to avoid fruitless comparisons in the first place? The paradox of living our lives in relation others, is that there will always be someone who has some form of “more”. We may “score” a fleeting feeling of pleasure when we compare favorably, but it’s quickly deflated when we inevitably compare unfavorably in another measure. Frittering away our lives in this futile effort to have (or at least appear to have) more than others, may well be one of the greatest indications of human irrationality ever known. At the very least, it is a pastime that robs one of the joy of living in the present, full of gratitude for the abundance we have in relation to no one.

Posted by Rebecca Sato

Related Galaxy posts:

The Consumer Paradox: Scientists Find that Low Self-Esteem and Materialism Goes Hand in Hand

The Big Brain & the Pursuit of Happiness

Related Links:

http://www.uni-bonn.de/en/News/101_2007.html
http://ideas.repec.org/p/esx/essedp/419.html
http://finance.yahoo.com/expert/article/moneyhappy/7254
http://sport.guardian.co.uk/golf/theobserver/story/0,,2208963,00.html

Reference:
Social Comparison Affects Reward-Related Brain Activity in the Human Ventral Striatum. K. Fliessbach, B. Weber, P. Trautner, T. Dohmen, U. Sunde, C. E. Elger, A. Falk. Science, 23.11.2007

Comments

I would argue that these findings really change nothing, in that they are simply an alternative way of stating the very same concepts of relative valuation.
"Size of reward", i.e. VALUATION, is most generally determined comparatively to others' size of reward - so in all cases of valuation, motivational stimulus would be based upon the same comparisons to others rewards.
In summary - all of the findings on motivation originate in the same supply and demand curve.

True, but still interesting.

Wow dude that is way cool!

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What I'm curious about is the cultural significance... how broad was the sample of people they used? For example, was the entire sample drawn from Western Europeans, or did they also include folks from other regions where this might be different?

I attended a lecture that I call http://ploneglenn.blogspot.com/2008/12/following-heard-off-precipice.html where the speaker gave a really interesting theory about economic bubbles. One of the reasons why people don't pull out of the market in a bubble, knowing full well that it may break at any moment, is that they can't stand the thought of making less money than their peers at any given point in time. Even if it means that ultimately they lose it all.

I personally cannot identify with materialism at all, I am an indivdual not a clone and raised my grown children as such...... I feel sorry for those caught up in materialism.....it really is fruitless in the end......less will always equal more in the end........ peace

Wow dude that is way cool!!

Interesting ...Motivations are always and ever interesting....purely virtual stuff within a brain done of Synapses and dendrides and neurons...God know of what else !!!!

ENGINES....motivations are engines.

Reasoning and speculating about motivations...is Good .

Nobody fully understands how they are 'generated' and how-when they intervene...It is NOT a disaster...they will learn....time ...they have time.

The matter is objectively difficult.

Good luck...to all the researchers.

And anyway ......Regards


There is nothing new in this piece of research other than verifying what has been known for decades if not centuries. Irrespective of race, environment and circumstances humans are born with three physcological drives PRO CREATION, SECURITY AND EMULATION. Smart marketers know these human traits and have evolved "consumerism" to cater for them. EMULATION ( keeping up with the Jones"s )is fundamental to this strategy.

How is this new information? I thought it was common knowledge; keeping up with the Jones'. And it make real world differences: If I get a $1 raise but everyone else gets a $2 raise then then inflation adjusts products cost and I am now making $1 less in actuality. This is what happened when Bill Clinton raised minimum wage; the bottom was raised, the middle and above stayed the same, but the cost of everything when up and I had less money in the bank.

Interesting. I wonder how that intertwines with the study showing that people prefer equality in incomes, and will work actively to level the economic playing field. There's an article on it here: http://www.reason.com/news/show/119760.html (ignoring the libertarian "well...we're still right!" trash at the end).

As to the individual above, re: Clinton and minimum wage. Nice theory, though prices had already gone up, and had been going up for years, before the minimum wage was raised to compensate. I think your correlation is mistaken.

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