Psychology Influences Markets

When it comes to economics versus psychology, score one for psychology.

Economists argue that markets usually reflect rational behavior—that is, the dominant players in a market, such as the hedge-fund managers who make billions of dollars' worth of trades, almost always make well-informed and objective decisions. Psychologists, on the other hand, say that markets are not immune from human irrationality, whether that irrationality is due to optimism, fear, greed, or other forces.

Now, a new analysis published the week of July 1 in the online issue of the Proceedings of the National Academy of Sciences (PNAS) supports the latter case, showing that markets are indeed susceptible to psychological phenomena. "There's this tug-of-war between economics and psychology, and in this round, psychology wins," says Colin Camerer, the Robert Kirby Professor of Behavioral Economics at the California Institute of Technology (Caltech) and the corresponding author of the paper.

Indeed, it is difficult to claim that markets are immune to apparent irrationality in human behavior. "The recent financial crisis really has shaken a lot of people's faith," Camerer says. Despite the faith of many that markets would organize allocations of capital in ways that are efficient, he notes, the government still had to bail out banks, and millions of people lost their homes.

In their analysis, the researchers studied an effect called partition dependence, in which breaking down—or partitioning—the possible outcomes of an event in great detail makes people think that those outcomes are more likely to happen. The reason, psychologists say, is that providing specific scenarios makes them more explicit in people's minds. "Whatever we're thinking about, seems more likely," Camerer explains.

For example, if you are asked to predict the next presidential election, you may say that a Democrat has a 50/50 chance of winning and a Republican has a 50/50 chance of winning. But if you are asked about the odds that a particular candidate from each party might win—for example, Hillary Clinton versus Chris Christie—you are likely to envision one of them in the White House, causing you to overestimate his or her odds.

The researchers looked for this bias in a variety of prediction markets, in which people bet on future events. In these markets, participants buy and sell claims on specific outcomes, and the prices of those claims—as set by the market—reflect people's beliefs about how likely it is that each of those outcomes will happen. Say, for example, that the price for a claim that the Miami Heat will win 16 games during the NBA playoffs is $6.50 for a $10 return. That means that, in the collective judgment of the traders, Miami has a 65 percent chance of winning 16 games.

The researchers created two prediction markets via laboratory experiments and studied two others in the real world. In one lab experiment, which took place in 2006, volunteers traded claims on how many games an NBA team would win during the 2006 playoffs and how many goals a team would score in the 2006 World Cup. The volunteers traded claims on 16 teams each for the NBA playoffs and the World Cup.

In the basketball case, one group of volunteers was asked to bet on whether the Miami Heat would win 4–7 playoff games, 8–11 games, or some other range. Another group was given a range of 4–11 games, which combined the two intervals offered to the first group. Then, the volunteers traded claims on each of the intervals within their respective groups. As with all prediction markets, the price of a traded claim reflected the traders' estimations of whether the total number of games won by the Heat would fall within a particular range.

Economic theory says that the first group's perceived probability of the Heat winning 4–7 games and its perceived probability of winning 8–11 games should add up to a total close to the second group's perceived probability of the team winning 4–11 games. But when they added the numbers up, the researchers found instead that the first group thought the likelihood of the team winning 4–7 or 8–11 games higher than did the second group, which was asked about the probability of them winning 4–11 games. All of this suggests that framing the possible outcomes in terms of more specific intervals caused people to think that those outcomes were more likely.

The researchers observed similar results in a second, similar lab experiment, and in two studies of natural markets—one involving a series of 153 prediction markets run by Deutsche Bank and Goldman Sachs, and another involving long-shot horses in horse races.

People tend to bet more money on a long-shot horse, because of its higher potential payoff, and they also tend to overestimate the chance that such a horse will win. Statistically, however, a horse's chance of winning a particular race is the same regardless of how many other horses it's racing against—a horse who habitually wins just five percent of the time will continue to do so whether it is racing against fields of 5 or of 11. But when the researchers looked at horse-race data from 1992 through 2001—a total of 6.3 million starts—they found that bettors were subject to the partition bias, believing that long-shot horses had higher odds of winning when they were racing against fewer horses.

While partition dependence has been looked at in the past in specific lab experiments, it hadn't been studied in prediction markets, Camerer says. What makes this particular analysis powerful is that the researchers observed evidence for this phenomenon in a wide range of studies—short, well-controlled laboratory experiments; markets involving intelligent, well-informed traders at major financial institutions; and nine years of horse-racing data.

The title of the PNAS paper is "How psychological framing affects economic market prices in the lab and field." In addition to Camerer, the other authors are Ulrich Sonnemann and Thomas Langer at the University of Münster, Germany, and Craig Fox at UCLA. Their research was supported by the German Research Foundation, the National Science Foundation, the Gordon and Betty Moore Foundation, and the Human Frontier Science Program.

Marcus Woo
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Wednesday, May 8, 2013
Dabney Hall, Lounge – Dabney Hall

Free jazz demonstration and concert

Caltech Senior Wins Gates Cambridge Scholarship

Catherine Bingchan Xie, a senior bioengineering major and English minor at Caltech, has been selected to receive a Gates Cambridge Scholarship, which will fund her graduate studies at the University of Cambridge for the next academic year. Xie, a Canadian citizen, is one of 51 new international recipients selected from a pool of more than 4,000 applicants based not only on intellectual ability, but also on leadership capacity and a commitment to improving the lives of others.

As a Gates Cambridge Scholar, Xie, 20, will pursue a Master of Philosophy in translational medicine and therapeutics. "The research program and the knowledge that I'm going to gain will provide me with an essential foundation for becoming a physician-scientist, translating research findings in the lab into revolutionary therapies," she says. "I'm really excited to join the Gates Cambridge community and be surrounded by people like me who want to make an impact on other people by taking on important roles and issues in society. I think the energy and enthusiasm of rising toward this common goal will be really invigorating."

Having lived in China, Australia, Canada, and the United States, Xie has been exposed to a variety of cultures—something that she says motivated her to want to become a highly involved leader in a diverse and multicultural society.

As an undergraduate student, Xie has taken full advantage of opportunities to pursue research projects in the laboratory with outstanding scientists. During her freshman year, she began working in the lab of Frances Arnold, the Dick and Barbara Dickinson Professor of Chemical Engineering, Bioengineering and Biochemistry, engineering ways to improve the thermostability of enzymes used to make biofuels. The summer following her sophomore year, Xie joined the lab of C. Garrison Fathman, professor of medicine and chief of the Division of Immunology and Rheumatology at the Stanford School of Medicine, to study a novel transcription factor regulator involved in the pathogenesis of Type I diabetes. When she returned to Caltech, she immediately joined the lab of David Baltimore, the Robert Andrews Millikan Professor of Biology, where she is currently working. There, her research focuses on microRNAs—tiny snippets of RNA that are only about 20 nucleotides long—and the regulatory role they play in the development of leukemia. 

"Catherine is a student with broad interests, an engaging personal style, and great effectiveness," Baltimore says. "She has been a pleasure to have in the laboratory, and I am not surprised that she has won this prestigious scholarship and chosen to broaden her knowledge by focusing on public health issues while she is at Cambridge."

Xie says her ultimate goal in life "is to be able to not only improve our understanding of disease mechanisms, but also to be able to use that understanding to create novel, innovative therapies in order to help people battle their diseases."

Xie's desire to help others was clear during her time at Caltech—she led Caltech Y service trips, during which she and other students helped to rebuild houses for low-income families, assisted in beach and riverbed cleanups, and worked at a homeless shelter. As a freshman, she started the annual Caltech Student Health Fair to make students more aware of the physical, mental, and emotional health resources on campus and throughout the community. She has also served on campus as the vice chair of the Academics and Research Committee and as a member of the Caltech Y Student Executive Committee.

"I'm so excited that Catherine has been chosen to receive this fellowship," says Athena Castro, executive director of the Caltech Y. "I just love her. She's enthusiastic, dedicated, positive, thoughtful, and committed."

In the summer of 2012, Xie broadened her horizons even more when she traveled to Switzerland as a recipient of Caltech's SanPietro Travel Prize. "Catherine demonstrated her ability to adapt quickly and truly engage in another culture on that trip," says Lauren Stolper, director of fellowships advising and study abroad. "She will represent Caltech well as a Gates Cambridge Scholar."

Xie says she is thankful to everyone who has contributed to her experience at Caltech. "My achievements wouldn't have been possible without people giving me opportunities, encouraging me, and providing me with feedback, allowing me to grow as a scientist and as an individual," she says. "Caltech has shown me that intellectual curiosity and passion are vital driving forces behind finding innovative solutions that will have a profound and meaningful impact on solving issues that confront society."

The 51 newly announced international scholars will join 39 new American Gates Cambridge Scholars. The Gates Cambridge Scholarship program was established in 2000 through a donation from the Bill and Melinda Gates Foundation to the University of Cambridge. Xie is the sixth Caltech undergraduate student to receive the fellowship. 

Kimm Fesenmaier
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Monday, April 1, 2013
Center for Student Services, 3rd Floor, Brennan Conference Room – Center for Student Services

Head TA Network Kick-off Meeting & Happy Hour

For Love or Money: Marriage and Economic Development in the Past

Watson Lecture Preview

Getting married and moving out of your parents' house may be key to your personal economic development, but are marriage patterns key to an entire society's development as well? Professor of Social Science History Tracy Dennison tells us what love's got to do with it at 8:00 p.m. on Wednesday, January 30, 2013, in Caltech's Beckman Auditorium. Admission is free.


Q: What do you do?

A: I'm interested in the way societies worked in the past, and how the complex of rules that governed a society and its markets affected the decisions ordinary people make. Not just economic transactions, but where to live, when to marry, how many children to have. Whether to live with your in-laws or strike out on your own.

We imagine that the modern world after the industrial revolution is a sharp break with the past. But many things we associate with "modern" society are quite old. In England, the "nuclear" household—parents and children, no grandparents, no cousins—goes back to at least the 15th century, and people married surprisingly late. Age 25 or 26 for women and 28 for men, in a society where your life expectancy at birth was in the low 30s. But if you managed to survive childhood, you were pretty likely to get to your 50s or 60s.

Since England and the Netherlands, which also had late marriage and nuclear-family households, were economically precocious, many people think those places had some set of virtuous cultural norms that translated into rapidly developing economies. But when we look more closely, we find that other parts of Europe had that same marriage pattern and no economic growth. So the marriage pattern is not a silver bullet.

Instead, family patterns fit into larger social and economic structures. In a society with more economic opportunities, people are less dependent on their kin. A maiden aunt in England could earn a living on her own as a wage laborer and have an independent household. But in a place like Russia the family played a much larger role in providing for her welfare because landlords, communes, and guilds constrained her participation in the economy. Not surprisingly, larger, multigenerational families were more common in premodern Russia.


Q: How do you discover this sort of thing?

A: I do most of my research in Russia, where serfdom didn't end until 1861. Every landlord ran his estate as he saw fit, and that included running the villages on his land. The rules and regulations differed from estate to estate, so there's a lot to compare. And they kept really, really detailed records—I mean, really detailed records. We know what people's occupations were, whether they paid their taxes punctually, and whether there were any conflicts with other members of the society. I work with censuses and land surveys, petitions to the landlord, and various reports from the estate management. There was even a court system of sorts, so there are transcripts in which you hear the peasants' own voices. There was usually a literate peasant who worked as a scribe. Usually the estate's bailiff was chosen from among the peasantry, and that person would have been literate as well.

The back rooms of the regional archives are filled with bundles of papers. It's often old, acidic paper that crumbles in your hands when you touch it, but if the archivist determines that the document's in decent shape, you can take it out to the reading room. Then you try to decipher the handwriting, which changes quite a bit from generation to generation. And because the region was so poor, they often reused the paper, and there's writing on top of writing—two sets of script, and you have to figure out which one's newer by the style of the handwriting. Trying to read the one underneath is pretty exciting.


Q: How did you get into this line of work?

A: I came to it in a roundabout way. I did Russian literature as an undergraduate, and I went to Russia with the idea that if I was going to be a graduate student in literature I had to learn Russian properly. But I was so struck by the society itself—why it was the way it was, and how it got there—that I got interested in history.

The past is not a foreign country. People then were very much like us—they worked, they socialized, they fell in love, they got married, they had children. They just had to do these things in much harsher conditions. You can look at what seems to us like very odd behavior and say, "Wow, they had weird ideas." We look more closely and say, "Oh. They're marrying young and staying home because of the very harsh penalties for not doing so. It's not because they loved having kids while living with all their relatives." If they're farming with really primitive tools, we can see this as a response to the cost of adopting new technology, or to the policy of a landlord who confiscates any surplus you produce. It wasn't a lack of interest or creativity; in fact, people were pretty creative at improving their lives.

There is this impression of ordinary people in the past—not the kings and queens, not the rich people—that they prayed, they accepted their lot, they were fatalistic. That is not what we see. We see people struggling against the constraints of their world all the time.


Named for the late Caltech professor Earnest C. Watson, who founded the series in 1922, the Watson Lectures present Caltech and JPL researchers describing their work to the public. Many past Watson Lectures are available online at Caltech's iTunes U site.

Douglas Smith
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Watson Lecture: "For Love or Money: Marriage and Economic Development in the Past"
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Friday, January 25, 2013

Course Ombudspeople Lunch

TEDxCaltech: If You Click a Cookie with a Mouse

This week we will be highlighting the student speakers who auditioned and were selected to give five-minute talks about their brain-related research at TEDxCaltech: The Brain, a special event that will take place on Friday, January 18, in Beckman Auditorium. 

In the spirit of ideas worth spreading, TED has created a program of local, self-organized events called TEDx. Speakers are asked to give the talk of their lives. Live video coverage of the TEDxCaltech experience will be available during the event at

When offered spinach or a cookie, how do you decide which to eat? Do you go for the healthy choice or the tasty one? To study the science of decision making, researchers in the lab of Caltech neuroeconomist Antonio Rangel analyze what happens inside people's brains as they choose between various kinds of food. The researchers typically use functional magnetic resonance imaging (fMRI) to measure the changes in oxygen flow through the brain; these changes serve as proxies for spikes or dips in brain activity. Recently, however, investigators have started using a new technique that may better tease out how you choose between the spinach or the cookie—a decision that's often made in a fraction of a second.

While fMRI is a powerful method, it can only measure changes in brain activity down to the scale of a second or so. "That's not fast enough because these decisions are made sometimes within half a second," says Caltech senior Joy Lu, who will be talking about her research in Rangel's lab at TEDx Caltech. Instead of using fMRI, Lu—along with postdoctoral scholar Cendri Hutcherson and graduate student Nikki Sullivan—turned to the standard old computer mouse.

During the experiments—which are preliminary, as the researchers are still conducting and refining them—volunteers rate 250 kinds of food for healthiness and tastiness. The choices range from spinach and cookies to broccoli and chips. Then, the volunteers are given a choice between two of those items, represented by pictures on a computer screen. When they decide which option they want, they click with their mouse. But while they mull over their choices, the paths of their mouse cursor are being tracked—the idea being that the cursor paths may reveal how the volunteers arrive at their final decisions.

For example, if the subject initially feels obligated to be healthy, the cursor may hover over the spinach a moment before finally settling on the cookie. Or, if the person is immediately drawn to the sweet treat before realizing that health is a better choice, the cursor may hover over the cookie first.

Lu, Hutcherson, and Sullivan are using computer models to find cursor-path patterns or trends that may offer insight into the factors that influence such decisions. Do the paths differ between those who value health over taste and those who favor taste more?

Although the researchers are still refining their computer algorithms and continuing their experiments, they have some preliminary results. They found that with many people, for example, the cursor first curves toward one choice before ending up at the other. The time it takes for someone's health consciousness to kick in seems to be longer than the time it takes for people to succumb to cravings for something delicious.

After graduation, Lu plans to go to graduate school in marketing, where she'll use not only neuroscience techniques but also field studies to investigate consumer behavior. She might even compare the two methods. "Using neuroscience in marketing is a very new thing," she says. "That's what draws me toward it. We can't answer all the questions we want to answer just using field studies. You have to look at what's going on in a person's mind."

Marcus Woo
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Top 12 in 2012

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Top 12 in 2012
Credit: Benjamin Deverman/Caltech

Gene therapy for boosting nerve-cell repair

Caltech scientists have developed a gene therapy that helps the brain replace its nerve-cell-protecting myelin sheaths—and the cells that produce those sheaths—when they are destroyed by diseases like multiple sclerosis and by spinal-cord injuries. Myelin ensures that nerve cells can send signals quickly and efficiently.

Credit: L. Moser and P. M. Bellan, Caltech

Understanding solar flares

By studying jets of plasma in the lab, Caltech researchers discovered a surprising phenomenon that may be important for understanding how solar flares occur and for developing nuclear fusion as an energy source. Solar flares are bursts of energy from the sun that launch chunks of plasma that can damage orbiting satellites and cause the northern and southern lights on Earth.

Coincidence—or physics?

Caltech planetary scientists provided a new explanation for why the "man in the moon" faces Earth. Their research indicates that the "man"—an illusion caused by dark-colored volcanic plains—faces us because of the rate at which the moon's spin rate slowed before becoming locked in its current orientation, even though the odds favored the moon's other, more mountainous side.

Choking when the stakes are high

In studying brain activity and behavior, Caltech biologists and social scientists learned that the more someone is afraid of loss, the worse they will perform on a given task—and that, the more loss-averse they are, the more likely it is that their performance will peak at a level far below their actual capacity.

Credit: NASA/JPL-Caltech

Eyeing the X-ray universe

NASA's NuSTAR telescope, a Caltech-led and -designed mission to explore the high-energy X-ray universe and to uncover the secrets of black holes, of remnants of dead stars, of energetic cosmic explosions, and even of the sun, was launched on June 13. The instrument is the most powerful high-energy X-ray telescope ever developed and will produce images that are 10 times sharper than any that have been taken before at these energies.

Credit: CERN

Uncovering the Higgs Boson

This summer's likely discovery of the long-sought and highly elusive Higgs boson, the fundamental particle that is thought to endow elementary particles with mass, was made possible in part by contributions from a large contingent of Caltech researchers. They have worked on this problem with colleagues around the globe for decades, building experiments, designing detectors to measure particles ever more precisely, and inventing communication systems and data storage and transfer networks to share information among thousands of physicists worldwide.

Credit: Peter Day

Amplifying research

Researchers at Caltech and NASA's Jet Propulsion Laboratory developed a new kind of amplifier that can be used for everything from exploring the cosmos to examining the quantum world. This new device operates at a frequency range more than 10 times wider than that of other similar kinds of devices, can amplify strong signals without distortion, and introduces the lowest amount of unavoidable noise.

Swims like a jellyfish

Caltech bioengineers partnered with researchers at Harvard University to build a freely moving artificial jellyfish from scratch. The researchers fashioned the jellyfish from silicon and muscle cells into what they've dubbed Medusoid; in the lab, the scientists were able to replicate some of the jellyfish's key mechanical functions, such as swimming and creating feeding currents. The work will help improve researchers' understanding of tissues and how they work, and may inform future efforts in tissue engineering and the design of pumps for the human heart.

Credit: NASA/JPL-Caltech

Touchdown confirmed

After more than eight years of planning, about 354 million miles of space travel, and seven minutes of terror, NASA's Mars Science Laboratory successfully landed on the Red Planet on August 5. The roving analytical laboratory, named Curiosity, is now using its 10 scientific instruments and 17 cameras to search Mars for environments that either were once—or are now—habitable.

Credit: Caltech/Michael Hoffmann

Powering toilets for the developing world

Caltech engineers built a solar-powered toilet that can safely dispose of human waste for just five cents per use per day. The toilet design, which won the Bill and Melinda Gates Foundation's Reinventing the Toilet Challenge, uses the sun to power a reactor that breaks down water and human waste into fertilizer and hydrogen. The hydrogen can be stored as energy in hydrogen fuel cells.

Credit: Caltech / Scott Kelberg and Michael Roukes

Weighing molecules

A Caltech-led team of physicists created the first-ever mechanical device that can measure the mass of an individual molecule. The tool could eventually help doctors to diagnose diseases, and will enable scientists to study viruses, examine the molecular machinery of cells, and better measure nanoparticles and air pollution.

Splitting water

This year, two separate Caltech research groups made key advances in the quest to extract hydrogen from water for energy use. In June, a team of chemical engineers devised a nontoxic, noncorrosive way to split water molecules at relatively low temperatures; this method may prove useful in the application of waste heat to hydrogen production. Then, in September, a group of Caltech chemists identified the mechanism by which some water-splitting catalysts work; their findings should light the way toward the development of cheaper and better catalysts.


In 2012, Caltech faculty and students pursued research into just about every aspect of our world and beyond—from understanding human behavior, to exploring other planets, to developing sustainable waste solutions for the developing world.

In other words, 2012 was another year of discovery at Caltech. Here are a dozen research stories, which were among the most widely read and shared articles from

Did we skip your favorite? Connect with Caltech on Facebook to share your pick.

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Reducing 20/20 Hindsight Bias

PASADENA, Calif.—You probably know it as Monday-morning quarterbacking or 20/20 hindsight: failures often look obvious and predictable after the fact—whether it's an interception thrown by a quarterback under pressure, a surgeon's mistake, a slow response to a natural disaster, or friendly fire in the fog of war.

In legal settings, this tendency to underestimate the challenges faced by someone else—called hindsight bias—can lead to unfair judgments, punishing people who made an honest, unavoidable mistake.

"Hindsight bias is fueled by the fact that you weren't there—you didn't see the fog and confusion," says Colin Camerer, the Robert Kirby Professor of Behavioral Economics at the California Institute of Technology (Caltech). Furthermore, hindsight bias exists even if you were there. The bias is strong enough to alter your own memories, giving you an inflated sense that you saw the result coming. "We know a lot about the nature of these types of judgmental biases," he says. "But in the past, they weren't understood well enough to prevent them."

In a new study, recently published online in the journal Psychological Science, a team led by Camerer and Shinsuke Shimojo, the Gertrude Baltimore Professor of Experimental Psychology, not only found a way to predict the severity of the bias, but also identified a technique that successfully reduces it—a strategy that could help produce fairer assessments in situations such as medical malpractice suits and reviewing police or military actions.

Hindsight bias likely stems from the fact that when given new information, the brain tends to file away the old data and ignore it, Camerer explains. Once we know the outcome of a decision or event, we can't easily retrieve those old files, so we can't accurately evaluate something after the fact. The wide-ranging influence of hindsight bias has been observed in many previous studies, but research into the underlying mechanisms is difficult because these kinds of judgment are complex.

But by using experimental techniques from behavioral economics and visual psychophysics—the study of how visual stimuli affect perception—the Caltech researchers say they were able to probe more deeply into how hindsight emerges during decision making.

In the study, the researchers gave volunteers a basic visual task: to look for humans in blurry pictures. The visual system is among the most heavily studied parts of the brain, and researchers have developed many techniques and tools to understand it. In particular, the Caltech experiment used eye-tracking methods to monitor where the subjects were looking as they evaluated the photos, giving the researchers a window into the subjects' thought processes.

Subjects were divided into those who would do the task—the "performers"—and those who would judge the performers after the fact—the "evaluators." The performers saw a series of blurry photos and were told to guess which ones had humans in them. The evaluators' job was to estimate how many performers guessed correctly for each picture. To examine hindsight bias, some evaluators were shown clear versions of the photos before they saw the blurry photos—a situation analogous to how a jury in a medical malpractice case would already know the correct diagnosis before seeing the X-ray evidence.

The experiment found clear hindsight bias. Evaluators who had been primed by a clear photo greatly overestimated the percentage of people who would correctly identify the human. In other words, because the evaluators already knew the answer, they thought the task was easier than it really was. Furthermore, the measurements were similar to those from the first study of hindsight bias in 1975, which examined how people evaluated the probabilities of various geopolitical events before and after President Nixon's trip to China and the USSR. The fact that the results between such disparate kinds of studies are so consistent shows that the high-level thinking involved in the earlier study and the low-level processes of visual perception in the new study are connected, the researchers say.

In the second part of the study, the researchers tracked the subjects' eye movements and found that hindsight bias depended on how the performers and evaluators inspected the photos. Evaluators were often looking at different parts of the photos compared to the performers, and when that happened there was more hindsight bias. But when both groups' gazes fell on similar locations on the photos, the evaluators were less biased. Seeing the wandering gazes of the first group as they tried to make sense of the blurry images seemed to allow the evaluators to internalize the first group's struggles. In other words, when the two groups literally saw eye to eye, the evaluators were less biased and gave a more accurate estimate of the first group's success rate.

Based on these results, the researchers suspected that if they could show the evaluators where people in the first group had looked—indicated by dots jiggling on the screen—then perhaps the evaluators' gazes would be drawn there as well, reducing any potential hindsight bias. When they did the experiment, that's exactly what happened.

Other studies have shown that merely telling people that they should be aware of hindsight bias is not effective, Camerer says. Something more tangible—such as dots that draw the evaluators' attention—is needed.

Although the experiments were done in a very specific context, the researchers say that these results may be used to reduce hindsight bias in real-life situations. "We think it's a very promising step toward engineering something useful," Camerer says.

For example, eye-tracking technology could be used to record how doctors evaluate X-ray or MRI images. If a doctor happens to make a mistake, showing eye-tracking data could reduce hindsight bias when determining whether the error was honest and unavoidable or if the doctor was negligent. Lowering the likelihood of hindsight bias, Camerer says, could also decrease defensive medicine, in which doctors perform excessive and costly procedures—or decline doing a procedure altogether—for fear of being sued for malpractice even when they have done nothing wrong.

As technology advances, our activities are being increasingly monitored and recorded, says Daw-An Wu, the first author of the paper and a former postdoctoral scholar at Caltech who now works at the Caltech Brain Imaging Center. But the study shows that having visual records alone doesn't solve the problem of fair and unbiased accountability. "For there to be some fair judgment afterward, you would hope that the other component of reality is also being recorded—which is not just what is seen, but how people look at it," he says.

The Psychological Science paper is titled "Shared Visual Attention Reduces Hindsight Bias." In addition to Camerer, Shimojo, and Wu, the other author is Stephanie Wang, a former postdoctoral scholar at Caltech who is now an assistant professor at the University of Pittsburgh. This research collaboration was initiated and funded by Trilience Research, with additional support from the Gordon and Betty Moore Foundation, the Tamagawa-Caltech Global COE Program, and the CREST program of the Japan Science and Technology Agency.

Marcus Woo
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Snap Judgments During Speed Dating

Caltech researchers identify two regions of the brain whose behavior predicts the outcome of speed dating

PASADENA, Calif.—For speed daters, first impressions are everything. But it's more than just whether someone is hot or not.

Whether or not we like to admit it, we all may make snap judgments about a new face. Perhaps nowhere is this truer than in speed dating, during which people decide on someone's romantic potential in just a few seconds. How they make those decisions, however, is not well understood.

But now, researchers at the California Institute of Technology (Caltech) have found that people make such speed-dating decisions based on a combination of two different factors that are related to activity in two distinct parts of the brain.

Unsurprisingly, the first factor in determining whether someone gets a lot of date requests is physical attractiveness. The second factor, which may be less obvious, involves people's own individual preferences—how compatible a potential partner may be, for instance.

The study, which is published in the November 7 issue of the Journal of Neuroscience, is one of the first to look at what happens in the brain when people make rapid-judgment decisions that carry real social consequences, the researchers say.

"Psychologists have known for some time that people can often make very rapid judgments about others based on limited information, such as appearance," says John O'Doherty, professor of psychology and one of the paper's coauthors. "However, very little has been known about how this might work in real social interactions with real consequences—such as when making decisions about whether to date someone or not. And almost nothing is known about how this type of rapid judgment is made by the brain."

In the study, 39 heterosexual male and female volunteers were placed in a functional magnetic resonance imaging (fMRI) machine and then shown pictures of potential dates of the opposite sex. They were given four seconds to rate, on a scale from 1 to 4, how much they would want to date that person. After cycling through as many as 90 faces, the participants then rated the faces again—outside the fMRI machine—on attractiveness and likeability on a scale from 1 to 9. Later, the volunteers participated in a real speed-dating event, in which they spent five minutes talking to some of the potential dates they had rated in the fMRI machine. The participants listed those they wanted to see again; if there were any matches, each person in the pair was given the other's contact information.

Perhaps to no one's surprise, the researchers found that the people who were rated as most attractive by consensus were the ones who got the most date requests. Seeing someone who was deemed attractive (and who also ended up with more date requests) was associated with activity in a region of the rater's brain called the paracingulate cortex, a part of the dorsomedial prefrontal cortex (DMPFC), which is an important area for cognitive control and decision making. The paracingulate cortex, in particular, has been shown to be active when the brain is comparing options.

This phenomenon was fairly consistent across all participants, says Jeff Cooper, a former postdoctoral scholar in O'Doherty's lab and first author of the paper. In other words, nearly everyone considers physical attraction when judging a potential romantic partner, and that judgment is correlated with activity in the paracingulate cortex.

"But that's not the only thing that's happening," Cooper adds. When some participants saw a person they wanted to date—but who was not rated as very desirable by everyone else—they showed more activation in the rostromedial prefrontal cortex (RMPFC), which is also a part of the DMPFC, but sits farther in front than the paracingulate cortex. The RMPFC has been previously associated with consideration of other people's thoughts, comparisons of oneself to others, and, in particular, perceptions of similarities with others. This suggests that in addition to physical attractiveness, the researchers say, people consider individual compatibility.

While good looks remains the most important factor in determining whether a person gets a date request, a person's likeability—as perceived by other individuals—is also important. For example, likeability serves as a tiebreaker if two people have equal attractiveness ratings. If someone thought a potential date was more likeable than other people did, then that someone was more likely to ask for a date.

"Our work shows for the first time that activity in two parts of the DMPFC may be very important for driving the snapshot judgments that we make all the time about other people," O'Doherty says.

As for the results of the speed-dating event? A few couples were still together six weeks afterward, Cooper says, but the researchers have not followed up. The study was focused on the neural mechanisms behind snap judgments—how those judgments relate to long-term romantic success, he says, is another question.

In addition to Cooper and O'Doherty, the other authors of the Journal of Neuroscience paper are Caltech graduate student Simon Dunne and Teresa Furey of Trinity College Dublin. The title of paper is "Dorsomedial Prefrontal Cortex Mediates Rapid Evaluations Predicting the Outcome of Romantic Interactions." This research was funded by an Irish Research Council on Science, Engineering, and Technology Fellowship, the Wellcome Trust, and the Gordon and Betty Moore Foundation.

Marcus Woo
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