How do people make decisions? According to standard economic theory, by maximizing their own payoffs, and by doing so rationally and strategically. In this seminar, we will learn about experimental research in behavioural economics, psychology and neuroscience. This research is providing a new picture of how human decisions actually work, that is, of when and how human decision making deviates away from the somewhat abstract rationality of standard economic theory.
We will begin by showing how, indeed, humans and many other species are equipped with psychological and neural processes that allow them to behave rationally (e.g., to approach rewards, avoid punishments, and weigh their trade-offs). We will then show how limited cognitive abilities and emotions can frequently make us stray away from perfect rationality.
We will then move on to social decisions. We will play some experimental games and introduce basic concepts of game theory. This theory tells us how “rational” players should play and we will compare it to experimental data on how people actually do play. In particular, we will learn about how interacting brains face social choices and how people can “read the mind” of others.
We will then take part in experiments on cooperation and see if we are as “selfish” as economic theory makes us out to be. We will cover a number of experiments showing that people cooperate with others and trust others, even if they would earn more by exploiting them. We will thus face the question of why people cooperate and we will learn about how a number of social emotions and motives (such as envy, power and altruism) come into play. We will particularly focus on the neuroscience of empathy and explain how this can lead to compassion and prosocial behaviour. We will conclude by covering experiments on how decision making can be socially influenced, and how social norms are likely to play a key role in driving decision making.
Learning outcomes
The learning outcomes for this course are:
- To understand core themes of decision theory, which are widely used in economics/business, psychology, neuroscience and even artificial intelligence.
- To understand how research in psychology and neuroscience can allow us to build more accurate models of social decision making in humans.
- To learn to read and critically evaluate experimental approaches to social behaviour and decision making.
Classes
1. The cognitive and neural bases of rational decision making In the first part of this session we will go over what it means for a decision to be rational in economic theory. In the second part we will introduce the brain’s reward system and show how this could allow humans and other species to make the right choice.
2. The cognitive and neural bases of irrational decision making We will learn how humans display a number of inconsistencies in their decision making. Among these, people are frequently more scared by prospective losses than they are excited by gains of equal magnitude (ie, loss-aversion) and their decisions are influenced by whether an option is described as ‘half full’ or ‘half empty’. In the second part of the session, we will go into the neural bases of these inconsistencies and learn that they are frequently associated with emotional processing.
3. Social decision making: from game theory to behaviour We will learn how the theory of rationality was extended to social decisions. To do this, we will simulate playing some economic games and learn what a Nash equilibrium is. We will then go over a series of behavioural economic experiments showing how humans are frequently motivated by concerns that go beyond payoff maximization: from altruism and fairness, to envy, status and social norms.
4. The neural bases of social decision making. We will learn how neural regions associated with social cognition, cognitive control and reward underlie our ability to strategize about others, inhibit selfish impulses and empathize with others.
5. Social norms and recap We will learn how the brain responds to social exclusion and how similar neural responses can be associated with the tendency to conform one’s own preferences to the preferences of others. Finally, we will connect the dots and synthesize everything we have learned in our sessions on the psychology and neuroeconomics of decision making.
Preparatory reading
Good preparation by all students will contribute significantly to the success of the seminar, and your understanding and enjoyment of the classes will be greatly enhanced by completing some of the readings and resources below:
Books (from lightest to most engaged)
The undoing project (the story of Kahneman & Tversky’s friendship and collaboration, which led to prospect theory): https://en.wikipedia.org/wiki/The_Undoing_Project
Thinking fast and slow (on the emotional/intuitive vs. deliberative/rational decision making): https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow
Simulating minds (goes deep into the psychological and neural bases of social cognition): https://www.amazon.com/Simulating-Minds-Philosophy-NeuroscienceMindreading/dp/0195369831
Behavioural game theory. A comprehensive survey of behavioural regularities and irregularities in human decision making: https://www.amazon.com/Behavioral-Game-Theory-ExperimentsInteraction/dp/0691090394
Neuroeconomics. The reference manual for neuroeconomics research: https://www.elsevier.com/books/neuroeconomics/glimcher/978-0-12-416008-8
Short introductory readings and video resources
Decety, J, Cowell, J M (2016). Our Brains are Wired for Morality: Evolution, Development, and Neuroscience.
Stallen, M, Griffioen, N Sanfey, A G (2017). Why Are We Not More Selfish? What the Study of Brain and Behavior Can Tell Us.
Links to the video resources will be available on our Virtual Learning environment (VLE) from early May.
Book chapters and studies from scientific journals
Tom, S M, Fox, C R, Trepel, C, and Poldrack, R A (2007). The neural basis of loss aversion in decision-making under risk. Science, 315(5811), 515-518.
Chierchia, G, and Singer, T (2017). The neuroscience of compassion and empathy and their link to prosocial motivation and behavior. In Decision Neuroscience (pp. 247-257). Academic Press.
Chierchia, G., Piera Pi-Sunyer, B., & Blakemore, S. J. (2020). Prosocial influence and opportunistic conformity in adolescents and young adults. Psychological Science, 31(12), 1585-1601.
Fehr, E, and Camerer, C F (2007). Social neuroeconomics: the neural circuitry of social preferences. Trends in cognitive sciences, 11(10), 419-42
Camerer, C F, and Fehr, E (2006). When does" economic man" dominate social behavior? Science, 311(5757), 47-52.
Camille, N, Coricelli, G, Sallet, J, Pradat-Diehl, P, Duhamel, J R, and Sirigu, A. (2004). The involvement of the orbitofrontal cortex in the experience of regret. Science, 304(5674), 1167-1170.
Sanfey, A G, Rilling, J K, Aronson, J A, Nystrom, L E, and Cohen, J D (2003). The neural basis of economic decision-making in the ultimatum game. Science, 300(5626), 1755-1758.
Harbaugh, W T, Mayr, U, and Burghart, D R (2007). Neural responses to taxation and voluntary giving reveal motives for charitable donations. Science, 316(5831), 1622-1625.
Bechara, A, Damasio, H, and Damasio, A R (2000). Emotion, decision making and the orbitofrontal cortex. Cerebral cortex, 10(3), 295-307
Typical week: Monday to Friday
For each week of study you select a morning (Am) and an afternoon (Pm) course, each course has five sessions, one each day Monday to Friday. The maximum class size is 25 students. Your weekly courses are complemented by a series of two daily plenary lectures, exploring new ideas in a wide range of disciplines. To add to the learning experience, we are also planning additional evening talks and events.
c.8.00am-9.00am |
Breakfast in College (for residents) |
9.00am-10.30am |
Am Course |
11.15am-12.30pm |
Plenary Lecture |
12.30pm-1.45pm |
Lunch |
1.45pm-3.15pm |
Pm Course |
4.00pm-5.15pm |
Plenary Lecture |
c.6.00/6.15pm-7.15/7.30pm |
Dinner in College (for residents) |
c.7.30pm onwards |
Evening talk/event |
Evaluation and Academic Credit
If you are seeking to enhance your own study experience, or earn academic credit from your Cambridge Summer Programme studies at your home institution, you can submit written work for assessment for one or more of your courses.
Essay questions are set and assessed against the University of Cambridge standard by your Course Director, a list of essay questions can be found in the Course Materials. Essays are submitted two weeks after the end of each course, so those studying for multiple weeks need to plan their time accordingly. There is an evaluation fee of £65 per essay.
For more information about writing essays see Evaluation and Academic Credit.
Certificate of attendance
A certificate of attendance will be sent to you electronically within a week of your courses finishing.