A Note on Measurement of Utility

Samuelson, Paul A.

doi:10.2307/2967612

Cited by 1,735 publications

(1,101 citation statements)

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“…This approach employed a black box methodology, observing the "revealed preferences" of outward behavior in favor of the underlying apparatus of valuation, and treating humans only "as if" they computed utilities (Friedman, 1953;Samuelson, 1937).…”

Section: Introductionmentioning

confidence: 99%

A neural reward prediction error revealed by a meta-analysis of ERPs using great grand averages.

Sambrook

Goslin

2015

Psychological Bulletin

334

388

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Economic approaches to decision making assume that people attach values to prospective goods and act in order to maximise their obtained value. Neuroeconomics strives to observe these values directly in the brain. A widely used valuation term in formal learning and decision-making models is the reward prediction error: the value of an outcome relative to its expected value. An influential theory (Holroyd and Coles, 2002) claims that an electrophysiological component, the feedback related negativity (FRN), codes a reward prediction error in the human brain. Such a component should be sensitive to both the prior likelihood of reward and its magnitude on receipt. A number of studies have found the FRN to be insensitive to reward magnitude, thus questioning the Holroyd and Coles account.However, because of marked inconsistencies in how the FRN is measured, a meaningful synthesis of this evidence is highly problematic. We conducted a meta-analysis of the FRN's response to both reward magnitude and likelihood using a novel method in which published effect sizes were disregarded in favour of direct measurement of the published waveforms themselves, with these waveforms then averaged to produce "great-grand averages". Under this standardised measure, the meta-analysis revealed strong effects of magnitude and likelihood on the FRN consistent with it encoding a reward prediction error. In addition, it revealed strong main effects of reward magnitude and likelihood across much of the waveform, indicating sensitivity to unsigned prediction errors or "salience". The great grand average technique is proposed as a general method for meta-analysis of ERPs.Keywords: Feedback related negativity (FRN); Event-related potential (ERP); Reward prediction error (RPE); Unsigned prediction error; Meta-analysis; Great grand average Masked Manuscript without Author Information 2 Explaining human behavior under choice requires understanding how humans assign value to goods and actions. This valuation occurs at a nexus of psychological influences running from high level processes such as framing effects and counterfactual comparisons down to basic physiological influences such as satiation. It is likely to be dependent on an individual's knowledge both through conscious extrapolation from experience and simple reinforcement learning.Early attempts to explain human valuation were aimed at demonstrating that choice was entirely rational, and embodied key axioms of neoclassical economics such as expected utility. This approach employed a black box methodology, observing the "revealed preferences" of outward behavior in favor of the underlying apparatus of valuation, and treating humans only "as if" they computed utilities (Friedman, 1953;Samuelson, 1937).These assumptions have come under attack from the field of behavioral economics, which has succeeded in documenting widespread and consistent deviations from rational choice. A fully psychological approach, behavioral economics has endeavored to open the black box and consider a more va...

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Section: Introductionmentioning

confidence: 99%

A neural reward prediction error revealed by a meta-analysis of ERPs using great grand averages.

Sambrook

Goslin

2015

Psychological Bulletin

334

388

View full text Add to dashboard Cite

show abstract

“…Utility, or happiness, was taken to be an internal psychological quantity, which can be numerically measured and, potentially, optimized. Much of modern economics, after the ‗ordinalist revolution' [2,3] has been more circumspect, claiming only that people make choices ‗as if' consulting a stable internal utility scale. But recent theories in behavioural economics have returned to a psychological concept of utility to explain people's choices [4,5].…”

Section: Type I: Value-first Decision Makingmentioning

confidence: 99%

“…Large parts of economic theory depend only on the assumption that options can be ordered from least preferred to most preferred (possibly with ties) [2]. For example, if I must choose between three sandwiches, and houmous < cheese < ham (where ‗<' represents a preference relation), then I will presumably choose ham.…”

mentioning

confidence: 99%

Does the brain calculate value?

Vlaev

Chater

Stewart

et al. 2011

Trends in Cognitive Sciences

264

214

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“…The canonical economic model of time preferences is the discounted utility model, first proposed by Samuelson (1937); in it, all future payments are discounted by a constant factor each period, leading to exponential discounting. 1 In the second half of the 20 th century, the discounted utility model was called into question by the finding that empirically observed discounting behavior, both in animals and humans, did not correspond to the predictions of exponential discounting; in particular, short-term discount rates were found to be higher than long-term discount rates (Ainslie 1975, Thaler 1981.…”

Section: Introductionmentioning

confidence: 99%