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SELF-CONTROL IN MODELS OF VALUE-BASED DECISION MAKING 1

Question 6 Value-Based Decision Making

Evaluating the Role of Self-Control in Models of Value-Based Decision Making

Candidate Number: VZXR3

Principles of Cognition

University College London


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Abstract

Once the peerless theory of choice, Expected Utility Theory (EUT) has become challenged on

theoretical and behavioral grounds. Neuroscience the study of the neurobiological and

computational basis of value-based decision-making has become one of its primary

contenders. Increasing technical possibilities and an exploding research volume in

neuroscience have raised expectations for a much deeper understanding of decision making.

But to provide a valid alternative to EUT, it must answer the challenges EUT has failed to

live up to. Self-control, a phenomenon traditionally ignored by economic theories, is an

integral part of decision making that neuroeconomics must be able to accommodate. This

paper discusses how different theories of neuroeconomics might be able to do so.

Keywords: value-based decision making, expected utility theory, self-control,

neuroeconomics, valuation systems


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Evaluating the Role of Self-Control in Models of Value-Based Decision Making

Its formal simplicity, ability to generate powerful predictions and seemingly

convincing axiomatization by von Neumann and Morgenstern, made Expected Utility Theory

(EUT) the definite theory of choice for much of the 20 th century. Apart from its mathematical

elegance, a great strength of EUT was that it allowed generating predictions from the simple

observance of choice behavior without requiring a model of the underlying processes that

generated the choices. The revealed preference axiom formed an important pillar of

economics and provided a powerful reason why inquiry into the nature of the choice process

was unnecessary (e.g. Glimcher, Camerer, Fehr, Poldrack 2008). A second argument for this

perspective was provided by Milton Friedman (1953), who argued that assumptions should

solely be judged by the quality of predictions they generate and not by whether they were true

in and of themselves. Thus, even as the validity of the axioms of EUT was challenged by

people like Allais (1953) or Ellsberg (1961), economists had arguments not to take this as a

motivation to look deeper into the mechanics of the decision making process. A different

challenge was posed from the area of self-control. People often seemed to act as if their

preferences changed or use commitments and self-restraint to guide their decisions. In a

traditional EUT framework, this kind of behavior was nonsensical, but again economists

agnosticism to choice processes made it easy to ignore those problems. It was mostly non-

economists like Elster who looked at irrational but intuitive processes like self-restraint,

commitment or weakness of will through a formal choice theoretic framework (1979, 1983,

2000).


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The Emergence of Neuroeconomics

Despite these serious challenges to EUT, the impact on mainstream economics was

limited. It was only through Kahnemann and Tverskys work (1979) that the beginnings of a

real shift in economics were initialized. Their experiments showed that people often had

inconsistent risk preferences, were susceptible to framing effects, i.e. different descriptions

of the choice situations and violated the independence axiom. In particular, loss aversion was

damaging to EUT as such decisions were seen as the core of economic. Their alternative to

EUT, prospect theory, became extremely influential and lead to an array of economic theories

about how people make choices. Many of these theories were different from EUT in that they

tried to understand the by which choices were made. At the same time, neuroscientists (e.g.

Damasio 1994; Bechara, Damasio, Tranel, Damasio 1994) began using lesion-studies to look

at decision-making and started identifying the functions of different brain areas in the

decision making process. Moreover, the advent of fMRI made it possible study brain activity

during the decision process. Glimcher, Camerer, Fehr, and Poldrack (2008) attribute the rise

of neuroeconomics to these two simultaneous trends. On the one hand, there were the

behavioral economists who generated theories about choice algorithms and looked to

neuroscience for novel ways to test them. On the other hand, neuroscientist became

increasingly interested in choices and looked to economics for formal models to assess their

findings about the neural mechanisms of choice.

The Challenge of Neuroeconomics

What is the challenge that neuroeconomics must live up to? The answer to this

question depends very much on ones perspective. Coming from a neuroscience angle, a valid

goal might be to provide some understanding about the algorithms and their neural

implementations that are involved in decisions. So far, knowledge in this area is still sparse


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but growing rapidly. But a strong argument for neuroeconomics is that EUT in its

conventional interpretation has nothing to say about the decision process. Coming from

economics, the challenge is a different one: Can neuroeconomic theories of decision-making

provide better predictions than EUT? What structure such theories will take is unclear.

Glimcher (2008) argues for a theory of Subjective Value (SV) as a central goal for

neuroeconomics. He suggests that SV should be linearly proportional (i.e. make the same

predictions) as EUT, when EUT successfully predicts choices and still be consistent with

choices, allowing for an error rate as he thinks choices are stochastically drawn, when EUT

doesnt generate good predictions. Whether this is the right framework or whether it is too

close to EUT remains to be seen. Kahnemann for one criticizes Glimchers proposal: a

unitary concept of utility cannot do justice to the complexities of the relationships

between what people (and other animals) want, what they expect to enjoy, what they

actually enjoy, and what they remember having enjoyed (p.525; 2008) . In my view, it

will be crucial for neuroeconomics to be able to explain and incorporate a phenomenon thateconomics never had been able to handle, but that is of tremendous importance in decision-

making: self-control.

The Problem of Self-Control

The study of self-control goes back much farther than the existence of either

economics or neuroscience. Intuitively, people have always understood that self-control is of

tremendous importance, but most scientific evidence for this is more recent. On a welfare

level, it has been found that self-control is uniquely powerful in predicting a wide range of

measures such as adjustment, pathology, interpersonal success (Tangney, Baumeister, &

Boone, 2004). It even outperforms IQ in predicting academic success (Duchworth, &

Seligman, 2005). But more important to my argument are a host of recent studies that seem to

indicate that self-control is a process intricately tied up with decision making. First, it was


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shown that self-control is a limited resource (Baumeister, Bratlavsky, Muraven, & Tice, 1998;

Baumeister, Vohs, & Tice, 2007): When people engage in a task that requires a great deal of

self-control, they exhibit less self-control in subsequent tasks even when those are completely

unrelated. But not only the exertion of self-control depletes subsequent self-control. The exact

same effect was observed when people had to engage in making choices: They subsequently

showed decreased levels of self-control (Vohs, Baumeister, Schmeichel, Twenge, Nelson, &

Tice, 2008). It was also found that complicated decisions like making compromises depleted

self-control and that by avoiding compromises self-control could be preserved. On the other

hand, a depletion the resources required for self-control and decision leads to simply

postponing decisions (Pocheptsova, Amir, Dhar, & Baumeister, 2009). Finally, it was found

that both decision-making and using self-control deplete glucose levels and that depleted

glucose levels would lead to decrease in self-control and impaired decision-making (Gailliot,

& Baumeister, 2007). Taken together these studies seem to show that self-control and

decision making are both cognitively taxing processes. More complex decisions or decisions

that require self-control use up the same resources and using up those resources by expending

self-control unrelated to decision making in turn depletes the resources available for decision

making. In other words, the studies indicate that self-control is an integral part of the

decision-making process.

Self-Control in Neuroeconomic Theories

So how is it possible to accommodate these findings in current neuroeconomic

models? What do they indicate about the nature of self-control, about the validity of

neuroeconomic models and about the direction future research should take? A good

framework to guide neuroeconomic investigations has been provided by Rangel, Camerer and

Montague (2008). The authors distinguish between five different parts of the decision making

process: 1) representation 2) valuation 3) action selection 4) outcome evaluation and 5)


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mechanisms. The first system is the Pavlovian system, which consists of behaviors that are

either learned or innate responses to environmental stimuli. The second system is the habit

system, which can learn to assign values to a wide range of actions. This learning process

occurs through a relatively slow trial-and-error process. An important feature of the habit

system is that the associations can be generalized so that a similar, but novel cue might trigger

an established habit. The third system is the goal-directed system, which functions by

assigning values to action-outcome associations. Particular to the goal-directed system is that

the value assigned to the action depends on the outcome and is updated when the value of the

outcome changes.

Self-control and Valuation

One plausible role of self-control could be in influencing which valuation system

determines the choice. In general, cases of self-control exertion seem to involve a conflict

between short-term versus long-term interests. It could be that this conflict arises from

conflicting valuations of different systems. I.e. the Pavlovian and habitual systems might

often provide more short-term focused valuations. To keep our analysis clear, if self-control

intervenes on the level of valuation, it cannot be that it simply serves to select the goal-

directed action choice versus an action choice by the Pavlovian or habitual system. In that

case, self-control would be active on the action selection level. However, one possibility

would be that self-control is necessary to generate a valuation on a goal-directed level in the

first place and that in absence of such a valuation the default choice would be to select a

Pavlovian or habitual response. This makes intuitive sense as coming up with a goal-directed

valuation requires an often complex cognitive process. A second possibility would be that

self-control might be used to change the outcome of a goal-directed valuation process. Again,

this makes sense intuitively: bringing attention long-term and indirect consequences often

requires effort, but such effort will change the value attached to actions. Dayan, Kakade, and


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Montague (2000) support the argument that selective attention might have other functions and

not just be a consequence of limited computational resources.

Self-control and Action Selection

Unlike valuation systems, the actual process of choice or action selection has been less

studied and the knowledge about it is very sparse. Glimcher (2008) argues that in the case of

the generation of eye-movements in monkeys it appears that the lateral intraparietal area (LIP)

as well as the frontal eye fields (FEF) and the superior colliculus (SC) encode a normalized

version of Subjective Value (SV), which he calls Relative Subjective Value (RSV). Then the

choice is initialized by external signals, which cause a convergence when the neurons are

driven above their burst threshold. But it is unclear to what extent similar processes apply to

other movements, to choices that dont involve specific movements and to humans in the first

place. On a more abstract level, Daw et al (2005) suggest that goal-directed action comes

from the search of an explicit model of the environment, whereas habitual action relies on a

prestored version. They argue that the prevailing system is the one that has more certain

estimates of the environment. Overall, none of these models indicate if and how self-control

might influence the action selection process when corresponding valuations have been

assigned.

Conclusion

In this paper, I reviewed briefly the history of decision theory in particularly EUT and

its role in economics. I went on to discuss the recent rise of neuroeconomics and described

some of the goals that neuroeconomics might strive to achieve in the coming years both to

provide real alternatives to EUT and further our understanding of decision making. I argued

that self-control is an integral and underestimated part of decision making and that one

criterion for the success of neuroeconomics should be whether it can successfully

accommodate self-control. I advanced that self-control, fundamentally, could influence


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decision making on the level of representation, valuation or action selection. Finally, I went

on to describe specific ways, by which self-control could affect decision making through

affecting the representation and valuation processes and discussed some current research on

the process of action selection.


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