Markets Are Better Than Patents in Promoting Discovery, Says Caltech Economists

Winner-take-all patent system in need of an overhaul, researchers say

PASADENA, Calif.--When it comes to intellectual curiosity and creativity, a market economy in which inventors can buy and sell shares of the key components of their discoveries actually beats out the winner-takes-all world of patent rights as a motivating force, according to a California Institute of Technology (Caltech)-led team of researchers.

In a paper published in this week's issue of the journal Science, an international team of researchers led by Peter Bossaerts, the William D. Hacker Professor of Economics and Management and professor of finance at Caltech, and Swiss Finance Institute Professor at the Ecole Polytechnique Federale Lausane in Switzerland, describes a series of experiments designed to quantify the different ways patent systems and market forces might influence a person's drive to invent, to solve intellectual problems.

Over the last hundred-plus years, the patent system has been the gold standard by which we've protected and tried to incentivize intellectual discovery. But Bossaerts and his team--which includes Debrah Meloso from Bocconi University in Milan, Italy, and Jernej Copic from the University of California, Los Angeles--now say there's a new game in town. Or, rather, an old game--the same free-market forces that drive so much of our economy.

The problem with patents, Bossaerts explains, is that they "give the prize to the winner only. Whoever comes in second or third walks away empty." This means that, for the patent system to work well, "a large number of people need to think they're the absolute best." The economic theory that motivated patent regulation even assumes that all people have an equal chance of being the best, he adds.

In reality, Bossaerts says, that's not how people think. Very few of us think we're the person most likely to come up with a unique solution to a problem before anyone else--and so very few of us are likely to even try to solve a difficult problem. We just assume that someone else will beat us to the patent punch.

On the other hand, Bossaerts notes, studies have shown that more than 50 percent of people think they're better than the median--a statistical impossibility, but one that can be exploited in the marketplace to generate trade.

The researchers were able to provide concrete evidence for these ideas by running a series of experiments in which participants were asked to solve what is known as "the knapsack problem." In the knapsack problem, participants are given a large number of items to pack into a knapsack that cannot possibly hold all of the items; their job is to try to figure out how to maximize the number of "valuable" items they can fit into the knapsack.

"These aren't always the most expensive items," says Bossaerts. "For instance, if you're packing the knapsack to go on a trip, one of the items you would consider most valuable would probably be a toothbrush."

Participants in Bossaerts's knapsack experiment had to solve one set of problems under a regime that worked in much the same way as a traditional patent system, with a $66 reward for whoever figured out the solution first.

The second set of problems was to be solved in a kind of free-trading market regime. Each item that could go into the knapsack was given a different price, and each participant was given five securities per item at the beginning of the experiment. They were then encouraged to buy and sell their securities for the various items, stocking up on shares of items they believed were likely to be included in the problem's solution, and getting rid of shares of items they thought would be left out of the knapsack.

Once the solution was revealed, the securities of the left-behind items became worthless, while the participants who had bought up shares of the included items were allowed to keep their earnings of $1 a share. While nobody won the full $66 as in the patent groups, several people in the market groups were able to benefit financially from coming up with a workable solution to the problem.

That solution didn't even have to be the optimal one, Bossaerts notes. "They didn't have to fully solve the problem to benefit financially," he explains. "They could solve only part of the problem--figure out a few items they believed would be in the solution, or those they thought wouldn't be there--and focus buying and selling those."

This resulted in a large number of different people trying different ideas each time the game was played. Allowing people to benefit even if they only tackle a part of a problem might well lead to more collaboration, and to the faster development of a final solution to the whole problem, Bossaerts adds. "This is important, because the nature of knapsack problems is such that one can only be sure that the optimal solution has been found after one has tried everything," he says.

To 'win' in the patent group, on the other hand, required coming up with the right answer first, which seemed to remove the incentive for the large majority of participants to even attempt solving the problem. "In one example, there was a woman who won a couple of times in a row," Bossaerts recalls. "She had over $120, and everyone else had nothing. They just gave up trying, saying, 'Why bother? She'll just figure it out before us anyway.'"

How would these sorts of market forces work in the "real world"? Bossaerts uses the concept of scientists working to invent a fuel-cell catalyst.

"If a scientist is really convinced that platinum, for instance, is the best catalyst for his fuel cell, the best way to go, he would go out and buy a bunch of platinum futures, knowing that once his invention got into the public domain, the items that go into that invention--in this case, platinum--will go up in price."

Without a patent on the invention, other people would also be free to create platinum-based fuel cells. But there would still be a benefit to being the first: That inventor would be the one able to buy up platinum futures when the prices were at their lowest. "In the market system, if you're first, you still have the advantage," Bossaerts explains. "But you also give the second and third person a chance to profit from their work as well."

Bossaerts's next step is to try to collect data to explain why the market system works. "Our conjecture is that it's due to this idea of overconfidence, that most people think they are better than most other people. But this study wasn't able to test that idea specifically, so we're hoping to do that in future studies."

Bossaerts is well aware that his ideas--even with solid data to back them up--are controversial. People are very protective of their patents, and of the system that guards them, he says. But in reality, says Bossaerts, his team's findings should be seen as reassuring, rather than threatening.

"The take-home message from this study is that one should not be too nervous about protecting intellectual property," he explains. "There are other ways you can benefit from your efforts as well, as long as you have a functioning free market economy in place. Even if you get rid of most patent laws, people will still innovate."

The study described in this paper, "Promoting Intellectual Discovery: Patents vs. Markets," was funded in part by the U.S. National Science Foundation and the Swiss Finance Institute.

Lori Oliwenstein
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Caltech's Colin Camerer Makes a Game of Economic Theory

Lecture at AAAS meeting looks at role of cognitive psychology in developing economic strategies

"Economics is the field that has used game theory the most broadly to understand bargaining, pricing, firm competition, incentive contracts, and more," explains Camerer, who is the Robert Kirby Professor of Behavioral Economics in Caltech's Division of Humanities and Social Sciences. "Almost all the analysis, however, assumes people plan ahead and carefully figure out what others will do, which often results in mathematical claims that are highly unrealistic cognitively."

In reality, Camerer says, a key part of strategizing about what other people--or corporations, or countries--will do involves thinking about what they think you will do. "You can also think about what others think you think. . . . It can go on and on."

Research by Camerer and others--including Teck Ho at the University of California, Berkeley, and Kuan Chong from the National University of Singapore--into this form of strategizing has led to what Camerer calls the "cognitive hierarchy theory."

"The cognitive hierarchy theory finds that people only do a few steps of this kind of iterated thinking," he explains. "Usually, it's just one step: I act as if others are unpredictable. But sometimes it's two steps: I act as if others think *I* am unpredictable. You can think of the number of steps a person takes as their strategic IQ. A higher strategic IQ means you are outthinking a lot of other people."

Most of us have a pretty low strategic IQ, but that's to be expected, Camerer notes. To reach a truly high strategic IQ requires either special experience with a particular type of game (such as poker), training, or, in rare cases, special gifts.

The cognitive hierarchy theory has been tested using many different game-theory experiments, as well as field-data sets. One such data set, Camerer says, is the Swedish LUPI lottery in which everyone picks a number from one to 99,999, and the lowest unique positive integer wins. "In this game you want to pick a low number, but one that is also a number nobody else will think of," he notes.

With more than 2.5 million observations to analyze--as well as a laboratory recreation of the lottery using numbers 1 to 99--Camerer and his colleagues from Caltech, the Stockholm School of Economics, and the National Taiwan University say the results fit extremely well with the original theory. If people were accurately guessing what everyone else would do, they would pick numbers from 1 to 5000 with equal frequency, and rarely pick any higher numbers. The Swedish players, however, chose lower numbers--numbers below 1000--much too often, from a strategic point of view. "This pattern is consistent with people doing two to three steps of thinking," Camerer says.

Camerer and colleagues have also been looking at how people make economic decisions when they are not given sufficient information to make an informed choice. "What should you infer about a restaurant with an online menu that doesn't have prices?" he asks. If you guessed that their prices are high, you'd probably be right. "And yet," says Camerer, "there are a number of people who could conclude that leaving prices off doesn't mean anything."

Or take the example Camerer studies, along with Caltech PhD alumnus Alex Brown (now at Texas A&M University) and Dan Lovallo, from the University of Western Australia--that of movies released without first being shown to critics, a process known as a "cold opening." To test their theory Camerer and colleagues looked at all 850 widely-released movies in the U.S. from 2000 through 2006.

"Usually, the movies that are not shown in advance are below-average movies as ultimately rated by both critics and moviegoers," says Camerer. "But there is a 15 percent increase in box office revenue from not first showing the movie."

The reason for this boost in ticket sales? Camerer thinks it has to do with people who don't think strategically--who don't have high strategic IQs. "We think it means you can fool some of the people some of the time," he says. "Specifically, you can fool the people who don't pay attention to reviews and who also don't realize that not wanting to show a movie to critics is a bad sign."

Camerer notes that cognitive hierarchy theory can be used by people and businesses to forecast more accurately what other people are likely to do in various situations; they can then use those forecasts to make better choices. "For instance," he says, "the data about cold openings could be used by the movie industry to retrospectively forecast whether they should have held a movie back from the critics." It could also help them to decide what to do in future cases to maximize their profits.


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Lori Oliwenstein
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Caltech-Led Researchers Find Negative Cues from Appearance Alone Matter for Real Elections

PASADENA, Calif.-- Brain-imaging studies reveal that voting decisions are more associated with the brain's response to negative aspects of a politician's appearance than to positive ones, says a team of researchers from the California Institute of Technology (Caltech), Scripps College, Princeton University, and the University of Iowa. This appears to be particularly true when voters have little or no information about a politician aside from their physical appearance.

The research was published online in the journal Social Cognitive and Affective Neuroscience ( on October 28.

Deciding whom to trust, whom to fear, and indeed for whom to vote in an election depends, in part, on quick, implicit judgments about people's faces. Although this general finding has been scientifically documented, the detailed mechanisms have remained obscure. To probe how a politician's appearance might influence voting decisions, Michael Spezio, an assistant professor of psychology at Scripps College and visiting associate at Caltech, and Antonio Rangel, an associate professor of economics at Caltech, examined brain activation in subjects looking at the faces of real politicians.

Using a functional magnetic resonance imaging (fMRI) scanner at the Caltech Brain Imaging Center, the researchers obtained high-resolution images of brain activation as volunteers made decisions about politicians based solely on their pictures.

The researchers conducted two independent studies using different groups of volunteers viewing the images of different politicians. Volunteers were shown pairs of photos, each with a politician coupled with their opponent in a real election in 2002, 2004, or 2006. Importantly, none of the study subjects were familiar with the politicians whose images they viewed.

In some experiments, the volunteers had to make character-trait judgments about the politicians--for example, which of the two politicians in the pair looked more competent to hold congressional office, or which looked more likely to physically threaten the volunteer. In other experiments, volunteers were asked to cast their vote for one politician in the pair; once again, their decisions were based only on the politicians' appearances.

The results correlated with actual election outcomes. For example, politicians who were thought to look the most physically threatening in the experiment were more likely to have actually lost their elections in real life. The correlation held true even when volunteers saw the politicians' pictures for less than one tenth of a second.

Importantly, the pictures of politicians who lost elections, both in the lab and in the real world, were associated with greater activation in key brain areas known to be important for processing emotion. This was true when volunteers simply voted and also when they closely examined the politicians' pictures for character traits. The studies suggest that negative evaluations based only on a politician's appearance have some effect on real election outcomes--and, specifically, may influence which candidate will lose an election. This influence appears to be more uniform than the influence exerted by positive evaluations based on appearance.

This finding fits with prior studies in cognitive neuroscience as well as in political theory.

"The results from our two studies suggest that intangibles like a candidate's appearance may work preferentially, or more uniformly, via negative motives, and by means of brain processing contributing to such negative evaluations," says Michael Spezio, the lead author on the study.

"It's important to note that the brain region most closely associated with seeing pictures of election losers, known as the insula, is known to be important in processing both negative and positive emotional evaluations. Its increased activation in response to the appearance of election losers is consistent with its association with negative emotional evaluations in several domains, including the sight of someone who looks disgusted or untrustworthy," Spezio says.

"Candidates try to evoke emotional reactions when they campaign for office, and this research gives us a new perspective on how much emotions might matter, and how they might matter, in terms of how voters view candidates," says study coauthor R. Michael Alvarez, a professor of political science at Caltech and codirector of the Caltech/MIT Voting Technology Project.

One surprise in the study is that negative evaluations, such as the perception that a candidate is threatening, influence election loss significantly more than positive evaluations like attractiveness influence election success. "While these findings are certainly very provocative, it is important to note their limitations," says study senior author Ralph Adolphs, Bren Professor of Psychology and Neuroscience and professor of biology at Caltech, and director of the Caltech Brain Imaging Center.

In particular, Adolphs says, the observed effects, while statistically significant, were rather small. "There is no doubt that many, many sources of information come into play when we make important and complex decisions, such as will happen in the upcoming elections. We are not claiming that how the candidates look is all there is to the story of how voters make up their minds--or that this is even the biggest part of the story. However, we do think it has some effect--and, moreover, that this effect may be largest when voters know little else about a candidate."

Adds Spezio, "Given the size of the effects we see, we are likely detecting the influence of voters who have little or no information about a candidate's views or life story, for example, or who choose not to pay attention to that information. Our finding is consistent with literature showing that humans prioritize negative information about outgroups"--groups of individuals who are perceived to not belong to one's own group, as defined by characteristics such as profession, age, gender, social community, and shared values, but to an outside group. "A voter who knows nothing about a candidate will likely put that candidate into a default outgroup position. From there, negative attributions are expected to get the primary weight in decisionmaking. And that is precisely what we see," he says.

"Earlier behavioral studies showed that rapid, effortless inferences from facial appearance predict the outcomes of political elections," says study coauthor Alex Todorov, an assistant professor of psychology and public affairs at Princeton University. In 2005, Todorov published the first study to show that voter decisions are significantly associated with character-trait judgments that are based entirely on the visual appearance of political candidates.

"However," Todorov adds, "these studies did not show how these inferential processes could play out at the level of individual voters. Two types of evidence will be critical to delineate the causal effects of appearance on electoral success: work by political scientists studying real voting decisions and work by cognitive neuroscientists studying the proximal mechanisms of the effects of inferences on decisions. The fMRI studies are an important step in the latter direction."

The coauthors of the study, titled, "A neural basis for the effect of candidate appearance on election outcomes," are John O'Doherty, associate professor of psychology at Caltech, Kyle Mattes of the University of Iowa, and Hackjin Kim of Korea University.

The work was supported by the Gordon and Betty Moore Foundation, the National Science Foundation, and the National Institutes of Health.



Kathy Svitil
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Caltech and UNC Research Finds Further Evidence for Genetic Contribution to Autism

PASADENA, Calif.--Some parents of children with autism evaluate facial expressions differently than the rest of us--and in a way that is strikingly similar to autistic patients themselves, according to new research by neuroscientist Ralph Adolphs of the California Institute of Technology and psychiatrist Joe Piven at the University of North Carolina at Chapel Hill.

Adolphs, Bren Professor of Psychology and Neuroscience and professor of biology, and his colleague Michael Spezio (now at Scripps College in Claremont, California) collaborated with Piven and autism experts at the University of North Carolina to study 42 parents of children with autism, a complex developmental disability that affects an individual's ability to interact socially and communicate with others. Based on psychological testing, 15 of the parents were classified as being socially aloof.

"This manifests as a tendency not to prefer interactions with others, not to enjoy 'small talk' for the sake of the social experience, and to have few close friendships involving sharing and mutual support. This characteristic is really a variation of the normal range of social behavior and not associated with any functional impairment," says Piven, director of the Carolina Institute for Developmental Disabilities.

The parents participated in an experiment that measured how they make use of the face to judge emotions. The subjects were shown images depicting facial expressions of emotion that were digitally filtered so that only certain regions of the face were discernible--the left eye, for example, or the mouth. The subjects were then asked to decide as quickly as possible if the emotion depicted was "happy" or "fear." The part of the face shown, and the size of the revealed area, randomly varied from trial to trial.

An analysis of the subjects' correct responses revealed that "aloof" parents relied much more heavily on the mouth to recognize emotion than they did on the eyes, as compared to nonaloof parents and, to a greater extent, to a group of parents of children without autism. Prior studies by Adolphs and his colleagues have shown that humans normally evaluate emotions by looking at the eyes--but studies by Adolphs and Piven have shown that individuals with autism do not.

"We found that some parents who have a child with autism process face information in a subtly, but clearly different way from other parents," says Adolphs. "This is evidence for the hypothesis that the parents with the autistic child have brains that function somewhat differently as well"--an idea that he and other researchers are currently investigating through brain imaging studies. One area of interest is the amygdala, a region located on either side of the brain in the medial temporal lobe that is known to process information about facial emotions and may have abnormal volume in both autistic individuals and their nonautistic siblings.

The finding indicates that certain aspects of autism do run in families. Although such a genetic link was noted in the 1940s in the earliest descriptions of autism, "our study adds considerable specific detail to the story," Adolphs says.

"Our data strongly suggest that genetic factors make a substantial contribution to autism, but that does not mean that the entire cause of autism is genetic. Together with many other studies, our study argues that genetic factors play a very important role in autism, while leaving open a role for other, environmental factors," he says. "We hope that this research contributes toward a cure for autism, even if only indirectly."

"It may lead us to finding genes that are responsible for the face-processing component in autism," Piven adds.

"A very important part of our paper," stresses Adolphs, "is that we are not claiming all people with autism, or their parents, are 'impaired.' Instead, our study shows that parents who have children with autism--like the autistic subjects themselves--are different, and do things differently."

The paper, "Selective Face Processing Abnormalities in Parents of Autistic Children," will be published July 17, 2008, in the early online edition of Current Biology.

The research was funded by grants from the National Institutes of Health and by the Simons Foundation.

Kathy Svitil

Caltech Researchers Reveal the Neuronal Computations Governing Strategic Social Interactions in the Human Brain

PASADENA, Calif.-- In a strategic game, the success of any player depends not just on his or her own actions, but on the behavior of every other player in the game. To be successful, players must not only pay attention to what other players do, but also how they are thinking.

Understanding how the brain functions during this strategizing is at "the core of studies of adaptive social intelligence," says John P. O'Doherty of the California Institute of Technology and the subject of a recent series of brain studies by O'Doherty and his colleagues that offer new insight into how the brain works in social situations.

O'Doherty, an associate professor of psychology, along with graduate student Alan N. Hampton and Peter Bossaerts, William D. Hacker Professor of Economics and Management and professor of finance at Caltech, had volunteers participate in a simple two-player strategy game. In the game, volunteers were assigned to play either the role of an employer or an employee, and were isolated from one another. One of them was placed within a functional MRI machine, which measured brain activity in real time.

During each trial, the participant acting as the employee had to choose to either work or not work, and the employer had to decide to check up on his employees ("inspect"), or to leave them alone ("not inspect"). What each party selects will depend both on their own goals and on their anticipation of the behavior of the other participant. For example, the employer, who is busy with other work, does not want to waste time checking on his employees, but does want to occasionally inspect them to make sure they're not slacking off--and to let them know he's watching. His employees, however, prefer to shirk their duties as much as possible when not being inspected, but would rather be found working when the employer decides to check on them.

To provide real incentive for the volunteers, they were given a small monetary award based on the outcome of each trial. An employer's maximum payoff, $1.00, occurs when his employees are working, and he does not check on them; employees in this situation earn nothing. An employer's worst payoff--$0.00--is assigned either when his employees are working and his mistrust leads him to inspect anyway, or when his employees are shirking and he does not inspect; in both scenarios, the employees earn $.50. In the final case, employees who are caught shirking get nothing, while their boss gets $.25.

The game is set up such that there is no possibility of a tie, with an equal payoff for both players. "It's a competitive situation," O'Doherty explains, "so each person has to keep anticipating and predicting the behavior of the other person, to outguess them"--and maximize their own profit.

"The whole point of this game is the idea that in order to do well, you have to predict what the other player is going to do, and for that you need to know what the other player thinks you are going to do," says O'Doherty.

This type of thought, in which a person creates a mental representation of the thoughts of another person, is known as mentalizing. "We're trying to understand the rules that the brain uses to make these representations. How do I take my perception of what you've done and then use that to work out what to do next? How does the brain transform information and then produce behavior?" O'Doherty says.

O'Doherty and his colleagues used a simple mathematical model that can solve such a game by taking into account the history of the opponent's choices to work out what that opponent is likely to do next. They found that subjects' actual choices could be predicted well by such a model. Furthermore, a number of brain areas previously implicated in mentalizing, such as the superior temporal sulcus (STS) and medial prefrontal cortex (mPFC), showed changes in their activity over time. These changes are predicted by the mathematical model, suggesting that the brain itself uses mathematical operations similar to that encapsulated in the model to solve the task.

O'Doherty and his colleagues found that activity in the mPFC changed depending on the subjects' success in past trials, while activity in STS reflected how that success compared with how well they thought they'd do. Furthermore, activity in the two brain areas appeared to be linked. "If the subjects were surprised by their prediction success"--if, say, they did more poorly than they had expected--"we saw increased activity in the STS. At the same time, there was increased correlation between activity in the STS and the mPFC," O'Doherty says.

This suggests, he says, that "the STS modulates the activity of the mPFC, telling it to refine its expectations, which can ultimately lead to a change in the subjects' behavior."

"This research is getting at the essence of how the brain functions in social situations," he says. Such studies could, therefore, eventually shed light on disorders, such as autism, that involve problems with social interaction.

The paper, "Neural correlates of mentalizing-related computations during strategic interactions in humans," was published in the May 6 issue of the Proceedings of the National Academy of Science. The work was partially funded by the Gordon and Betty Moore Foundation.

Kathy Svitil
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How Fairness Is Wired in the Brain

PASADENA, Calif.--In the biblical story in which two women bring a baby to King Solomon, both claiming to be the mother, he suggests dividing the child so that each woman can have half. Solomon's proposed solution, meant to reveal the real mother, also illustrates an issue central to economics and moral philosophy: how to distribute goods fairly.

Now, researchers at the California Institute of Technology have discovered that reason struggles with emotion to find equitable solutions, and have pinpointed the region of the brain where this takes place. The concept of fairness, they found, is processed in the insular cortex, or insula, which is also the seat of emotional reactions.

"The fact that the brain has such a robust response to unfairness suggests that sensing unfairness is a basic evolved capacity," notes Steven Quartz, an associate professor of philosophy at Caltech and author of the study, voicing a sentiment that anyone who has seen children fight over a treat can relate to.

"The movement to look into the neural basis for ethical decision making is only about seven years old," Quartz adds. "This is the first study where people made real decisions with real consequences."

The subjects in the study, 26 men and women between 28 and 55 years old, faced a real-world moral dilemma. They started their participation in the experiment by reading a short biography of each of the 60 orphans at the Canaan Children's Home in Uganda. The orphanage would receive a sum of money that would depend on decisions the subjects made. In the end, $2,279 was donated.

While a functional magnetic resonance imaging (fMRI) machine scanned their brains for peak activity regions, the participants each had about eight seconds to decide how to distribute meals among groups of children in different scenarios. In one, their choice would grant either four extra meals to each of two children or six extra meals to one child. The children they didn't choose would get nothing. In another scenario, the kids had been given extra meals and the subjects had to decide whether it was better to take six meals away from each of two kids, or ten meals away from one.

Ultimately the subjects' brains made a choice, and Quartz and his collaborators got to peek into where that calculation was made. "You wonder what is happening at different levels--is your brain's decision right or not?"

When they got to give food to the children, the study participants' orbital frontal cortex, the reward region of the brain, lit up. When instead they had to take food away, the insula region--the emotional processor--was activated.

Quartz suggests that the insula was triggered by the inequity of the choices. The activity varied considerably across subjects, indicating that individual differences in moral sensitivity may be rooted in the strength of the biological responses, he adds.

"The emotional response to unfairness pushes people from extreme inequity and drives them to be fair," Quartz says. This observation, he adds, suggests that "our basic impulse to be fair isn't a complicated thing that we learn."

This study, which appears in the May 8 early online edition of the journal Science, is the first to examine "neuroethics"--the neural underpinnings of moral decision making--with real-world consequences. It may also help guide how to make policy decisions about distributing resources. And, adds Jonathan Katz, chair of Caltech's Division of the Humanities and Social Sciences, "It's one of the first studies to bridge humanities research with social science and biology," a central effort at Caltech.

Other authors are former Caltech graduate students Ming Hsu. and Cédric Anen. Hsu is now a postdoc at the University of Illinois at Urbana-Champaign.

Elisabeth Nadin

Two Faculty Members Join American Academy of Arts and Sciences

PASADENA, Calif.--Caltech professors Michael Dickinson and Thomas Palfrey are among the 190 new fellows elected to the American Academy of Arts and Sciences this year. They join an assembly that was founded in 1780 by John Adams, James Bowdoin, John Hancock, and other scholars to provide practical solutions to pressing issues.

Their election brings the Caltech total membership to 86.

Thomas Palfrey, Caltech's Flintridge Foundation Professor of Economics and Political Science and also a Caltech grad (PhD '81), specializes in the study of voting and elections, economic and political theory, public and experimental economics, and game theory.

A central focus of Palfrey's research is how people devise strategies when faced with incomplete information. He has applied game theory to examine voting behavior in committees and elections, and bidding in auctions. He founded or cofounded several experimental labs, including the California Social Science Experimental Laboratory at UCLA, the Social Science Experimental Laboratory at Caltech, and the Princeton Social Science Experimental Laboratory, and used observations from experiments to help develop a general theory of strategic behavior with human error. Called Quantal Response Equilibrium, it has been successfully applied to study a broad range of political and economic behavior.

Michael Dickinson, the Zarem Professor of Bioengineering at Caltech, studies animal physiology and behavior. He has become well known for Robofly, a mechanical fly that sprang from his work on the neurobiology and biomechanics of fly locomotion. Throughout his career, Dickinson has used a variety of tools, such as wind tunnels, virtual reality simulators, high-speed video, and giant robotic models, to determine how the poppy seed-sized brains of these tiny insects can rapidly control aerodynamic forces.

More than a simple understanding of the material basis for insect flight, Dickinson's studies provide insight into complex systems operating on biological and physical principles: neuronal signaling within brains, the dynamics of unsteady fluid flow, the structural mechanics of composite materials, and the behavior of nonlinear systems are all linked when a fly takes wing.

"The Academy honors excellence by electing to membership remarkable men and women who have made preeminent contributions to their fields, and to the world," says Academy president Emilio Bizzi. "We are pleased to welcome into the Academy these new members to help advance our founders' goal of 'cherishing knowledge and shaping the future.'" An independent policy research center, the Academy currently focuses on science, technology, and global security; social policy and American institutions; the humanities and culture; and education.

Dickinson and Palfrey will be inducted into the Academy at a ceremony on October 11, at the organization's headquarters in Cambridge, Massachusetts.

Other new members include legendary blues guitarist B. B. King, two-time cabinet secretary and former White House Chief of Staff James Baker III, and former eBay CEO Margaret Whitman, as well as foreign honorary member Pedro Almodóvar, a Spanish film director. 

Elisabeth Nadin
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Locating a "Free Choice" Brain Circuit

PASADENA, Calif.--Your brain gets a better workout when you change your routine, say scientists at the California Institute of Technology who have pinpointed one particular circuit that activates your ability to execute a decision. This finding may help drive research in neural prosthetics and in how unhealthy decisions are made.

"How you decide to do things is fascinating, and not well understood," says Richard Andersen, Caltech's Boswell Professor of Neuroscience and senior researcher in the study. "We're looking at how different areas interact during the process--how you make a decision to plan a movement."

Andersen and his two collaborators focused on the cortex, the part of the brain where language, memories, and awareness of the outside world develop. They found that when choices are open, the brain's frontal and parietal cortices relay clear signals back and forth. In contrast, when a decision and the path to execute it are dictated, the correlation between these regions is significantly weaker.

"These findings show that different parts of the brain are working together. The premotor region--in the frontal cortex--first forms the plan; then once the signal travels to the parietal cortex, this second region sends back a 'handshake' as if to say, 'okay, I got it,'" explains Andersen.

To examine the circuit involved in decision making, two adult male monkeys were first dictated a specific sequence in which to touch three different shapes on a touch-sensitive screen in order to win a sip of liquid. After that, they were presented with a screen showing all circles, and only a randomly picked circle yielded the reward. Each monkey touched the circles in varying orders from trial to trial, suggesting he was making his own decisions. "When only circles are displayed, he knows the choices are free and that he'll get rewarded eventually," Andersen notes.

During these trials, tiny wires were planted close to neurons in both cortical areas. There are no pain endings in the brain, so the monkeys did not feel any discomfort, but the wires allowed the neural signals, the pulse-like waves of voltage called action potentials, to be recorded. A frequency band of the action potentials from a cell in one cortical area often matched a frequency band of the local field--a local voltage oscillation related to the synaptic potentials--in the other area. When the monkey was making his own choices, this correlation, or coherence, was significantly stronger than when he was following instructions.

"It may be more difficult to make your own choices, and this may be related to the increased coherence," Andersen remarks. "The cells that show coherence were also the first to show the direction the monkey chose to go," he adds, noting also that the short duration of coherence likely reflects that the decision is made very early on.

While the scenario examined here focused on situations that are immediately rewarded, Andersen says, "Even the long-range decisions that are made in other areas require this circuit to put them into play."

The implications for this research are manifold. "How does someone form preferences and plan movements to control a prosthetic arm, for example?" Andersen remarks. He also notes that mental illness, aging, or even fatigue, not to mention the extreme case of addiction, can drive unhealthy choices. Once the regions of the brain responsible for free choice are deciphered, poor decision making may also be better understood.

Other authors on the study, appearing April 16 in the early online edition of the journal Nature, are Bijan Pesaran, a former Caltech postdoc with Andersen and now an assistant professor at New York University, and Matthew Nelson, a Caltech graduate student in computation and neural systems. 



Elisabeth Nadin

Sixth Annual Caltech Science Writing Symposium

PASADENA, Calif.-California Institute of Technology President Jean-Lou Chameau and Pulitzer Prize-winning journalist Usha Lee McFarling will be the featured speakers at the sixth annual Caltech Science Writing Symposium. The topic of their conversation will be the importance and challenges of communicating science to the general public.

The symposium will take place on Friday, February 29, at 4 p.m., at Beckman Institute Auditorium on the Caltech campus. The event is free and open to the public.

As a civil and environmental engineer and president of one of the world's leading academic institutions, Chameau addresses diverse groups and often must communicate complex issues to audiences with varying ranges of scientific knowledge.

And as a former science journalist for the Los Angeles Times, McFarling, on a daily basis, had to clearly communicate technical concepts to the general public. Her recent series of articles, "Altered Oceans," which examines how ocean pollution threatens sea life and human health globally, won not only the Pulitzer Prize, but also awards from the American Association for the Advancement of Science, the American Geophysical Union, and the National Association of Science Writers. McFarling also wrote for the Knight Ridder Washington bureau and the Boston Globe.

Together, Chameau and McFarling will discuss the difficulties of conveying scientific information to nonspecialists and will share their insights and tips for communicating effectively.

The symposium is presented by the Words Matter program and Caltech's Division of Humanities and Social Sciences.

Deborah Williams-Hedges
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Wine Study Shows Price Influences Perception

PASADENA, Calif.-- A rose by any other name might smell as sweet, but slap on a hefty price tag, and our opinion of it might go through the roof. At least that's the case with the taste of wine, say scientists from the California Institute of Technology and Stanford University.

Antonio Rangel, an associate professor of economics at Caltech, and his colleagues found that changes in the stated price of a sampled wine influenced not only how good volunteers thought it tasted, but the activity of a brain region that is involved in our experience of pleasure. In other words, "prices, by themselves, affect activity in an area of the brain that is thought to encode the experienced pleasantness of an experience," Rangel says.

Rangel and his colleagues had 20 volunteers taste five wine samples which, they were told, were identified by their different retail prices: $5, $10, $35, $45, and $90 per bottle. While the subjects tasted and evaluated the wines, their brains were scanned using functional magnetic resonance imaging, or fMRI.

The subjects consistently reported that they liked the taste of the $90 bottle better than the $5 one, and the $45 bottle better than the $35 one. Scans of their brains supported their subjective reports; a region of the brain called the medial orbitofrontal cortex, or mOFC, showed higher activity when the subjects drank the wines they said were more pleasurable.

There was a catch to the experiment, however. Although the subjects had been told that they would taste five different, variously priced wines, they actually had sampled only three. Wines 1 and 2 were used twice, but labeled with two different prices. For example, wine 2 was presented as the $90 wine (its actual retail price) and also as the $10 wine. When the subjects were told the wine cost $90 a bottle, they loved it; at $10 a bottle, not so much. In a follow-up experiment, the subjects again tasted all five wine samples, but without any price information; this time, they rated the cheapest wine as their most preferred.

Previous marketing studies have shown that it is possible to change people's reports of how good an experience is by changing their beliefs about the experience. For example, says Rangel, moviegoers will report liking a movie more when they hear beforehand how good it is. "Our study goes beyond that to show that the neural encoding of the quality of an experience is actually modulated by a variable such as price, which most people believe is correlated with experienced pleasantness," he says.

The experiment doesn't reveal whether the subjects truly experienced more pleasure from the wines that they thought were more expensive. "The area of their brain that is thought to encode for the pleasantness of the experience was more active when they drank wine they believed had higher prices. Strictly speaking, that is the only hard finding of the paper," he says. However, he adds, "it is hard to believe that this is not affecting their actual experience somehow, but we don't have hard evidence for that."

The results, while puzzling, actually make intuitive sense, Rangel says: "The brain encodes pleasure because it is useful for learning which activities to repeat and which ones to avoid, and good decision making requires good measures of the quality of an experience." But the brain is also a noisy environment, and "thus, as a way of improving its measurements, it makes sense to add up other sources of information about the experience. In particular, if you are very sure cognitively that an experience is good (perhaps because of previous experiences), it makes sense to incorporate that into your current measurements of pleasure." Most people believe, quite correctly, that price and the quality of a wine are correlated, so it is therefore natural for the brain to factor price into an evaluation of a wine's taste.

Could the findings be used by marketers to mess even more with consumers' heads? "Not directly," Rangel says. "But it certainly points out a channel through which prices affect the consumer experience and thus sales."

The paper, "Marketing actions can modulate neural representations of experienced pleasantness," was published January 14 in the early online edition of the Proceedings of the National Academy of Sciences.

Kathy Svitil


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