After Individualism: activating the social brain

In the next issue of the RSA Journal, editor-at-large of Seed magazine Jonah Lehrer explores human decision-making, a foretaste of his new book How We Decide. Meanwhile, behavioural economist Pete Lunn investigates how we might think about policy after the apparent collapse of the individualism of neo-classical economics.

These topics are connected and, to some extent, have played out in the recent financial turmoil: the models used to plan our economies were based on simplified individualistic assumptions about how human beings make decisions. Namely, that their decisions are wholly rational, coalesce in various forms of equilibrium (such as that between supply and demand), and are motivated solely by self-interest.

These individualistic assumptions were originally adopted not because they gave a true description of human nature, but because they were thought to provide the best model for predicting behaviour. However, given the recent credit crunch, it is doubtful whether this is in fact the case.

The ideologue might insist that the requisite individualism was never pursued purely or vigorously enough, and that markets would have continued to function perfectly well if this had been the case. But it does seem that we are incapable of learning some kinds of lessons. After all, financial bubbles and boom and bust cycles are nothing new. So perhaps we should think about policies that reflect our cognitive shortcomings rather than vainly hoping we will rid ourselves of them? This is a tall order, as governments and citizens alike are inured to the individualistic assumptions of neo-classical economics.

New research in neuroscience, behavioural economics and social psychology, casting doubt on the idea that human behaviour is always rational and driven essentially by self-interest, has come into sharp focus in the current climate. The evidence warrants further inquiry. It also demands an integrated, inter-disciplinary approach if the research is to connect with, and meaningfully inform, policy issues. The RSA’s new Social Brain project aims to construct a credible, holistic account of human decision-making, engaging both practitioners and policymakers in order to explore how such knowledge can best be applied in practice.

On 30 January, to mark the project launch, the RSA co-hosted a seminar and evening lecture on neuroscience and behavioural economics, with the Wellcome Trust Centre for Neuroimaging and the Centre for Economic Learning and Social Evolution. The crux of the debate was: how best do we think about decision-making ‘after individualism’?. From a wide-ranging and sometimes heated discussion, a number of salient points emerged:

Key points

  • Much of decision-making stems from 'irrational' emotions and 'gut instincts' rather than rational self-conscious deliberation. Policy that seeks to influence behaviour should always take into account which of these processes is driving decision-making
  • It is probably false to think there are any purely rational decision-making processes or any purely irrational ones. Policies should reflect this, as well as the specific kinds of emotional/instinctual processes at work and the contexts in which decisions are made
  • Just because self-conscious deliberation is rarer than was previously thought and seemingly almost never purely rational, this does not sound its death knell. Rather, a proper understanding of the role of ‘irrational’ influences on decision-making can help individuals to deliberate better
  • Wherever possible policy should not take away the free choice of individuals. For example, 'nudging' people to save for pensions by making opt-in the default still allows them to choose whether to save or not
  • Many kinds of decisions are not made for self-interested reasons. A desire for fairness may often be a strong influence. What's more, an individual's reputation for being fair may enhance his ability to pursue his own interests. This means it is very hard to disentangle self-interested from 'pro-social' motivations for decisions
  • Where such pro-social motivations exist, policies can attempt to engage and enable the capabilities of individuals themselves, rather than simply paternalistically 'nudge' behaviour
  • Markets (such as financial trading markets) should be designed with both the weaknesses and strengths of human decision-making processes in mind. For example, the brain cannot adjust quickly enough to price trends in real time but it is excellent at detecting unusual trading patterns such as those produced by insider traders

These issues will be explored more fully in the Spring Journal and in an RSA pamphlet to be published at the beginning of April. The pamphlet will collate and build on the findings of the January seminar. In the meantime, the Social Brain project will continue to investigate human decision-making with an open mind.

Matt Grist is director of the RSA’s Social Brain project