The potentially exciting thing about neuroeconomics is that, even allowing for inexactness, it might tell us more about the actual hedonic motivators of people. Ambitious, yes, but not unimaginable. Of course, to an economist who wasn't under the mistaken impression that simplified preferences are supposed to be realistic, it might just amount to saying "your simplification is a simplification", which is slightly less exciting news. Or not news at all.
OK. In today's article, we learn that
modern economic and financial theory is based on the assumption that people are rational, and thus that they systematically maximize their own happiness, or as economists call it, their “utility.”Since it's hard to figure out what is going on in people's heads, the argument continues, we employed an idea called revealed preference, the reconstruction of unobserved objectives from observed choice. Neuroeconomics, the claim runs, may one day be able to identify brain structures that are associated with various components of choice, and so neatly sidestep the problem of unobservability.
But this is much too much:
While Glimcher and his colleagues have uncovered tantalizing evidence, they have yet to find most of the fundamental brain structures. Maybe that is because such structures simply do not exist, and the whole utility-maximization theory is wrong, or at least in need of fundamental revision.Utility-maximization theory is wrong. It is wrong by construction, because it is a model, and models are wrong by construction. Why must we go through this? It might be easier to sell me an iPod if you first convince me that CDs are useless, but that's marketing. Why do we need to market neuroeconomics this way? That tiny little word "wrong" up there is a sin, because it belies the very essence of modeling as a means to make sense of things.
Is it perhaps that what we should understand by the quote is that looking into the brain will tell us that people are not, in some sense, maximizing their hedonic pleasure by the choices they make? This amounts to both an attempt to open the black box called "preferences" and to pin down the (biological?) process by which decisions are actually made. If this is the sense in which utility-maximization will be proved "wrong", then in the first place it is not clear to me that neuroeconomics can accomplish such a thing. Leaving aside the tricky questions of intent, free will and consciousness, can there be anything inside the black box but another, and another? The leap from the correlates of physical choices in brain activity to the content or existence of a utility function is huge.
But more importantly, even taking literally the notion that we will be able somehow to trap preferences or process in a cage, it is surely impossible that any breadth or depth of evidence on what these preferences are could preclude the need for us to model. What if the thankless treadmill of refining imperfect models of the world could at last be switched off, that there is an apple of knowledge that will free us from the need for models ever again? This is a seductive idea, but it cannot be. To do away with models would be to be as complex as reality, and that is a fight that reality will win every time.