Neuroeconomics of Mind Reading and Empathy

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NEUROSCIENTIFIC FOUNDATIONS OF ECONOMIC DECISION-MAKING†

The Neuroeconomics of Mind Reading and Empathy

By TANIA SINGER AND ERNST FEHR*

Economics and game theory are based on theassumption that people are capable of pre-dicting others’ actions. The most fundamentalsolution concepts in game theory (Nash equi-librium, backward induction, and iterated elim-ination of dominated strategies) are based onthis assumption. These concepts require people

to be able to view the game from the otherplayers’ perspectives (i.e., to understand others’motives and beliefs). Economists still know lit-tle about what enables people to put themselvesinto others’ shoes and how this ability interactswith their own preferences and beliefs. In fact,experimental evidence suggests that many peo-ple do not obey these concepts and frequentlybehave as if they believe, counterfactually, thatothers will play dominated strategies (Colin F.Camerer, 2003). Social neuroscience providesinsights into the neural mechanism underlying

our capacity to represent others’ intentions, be-liefs, and desires, referred to as “theory of mind” or “mentalizing,” and the capacity toshare the feelings of others, referred to as “em-pathy.” We summarize the major findings aboutthe neural basis of mentalizing and empathizingand discuss their implications for economics.

Normal adults are capable of both mentaliz-ing and empathizing. These abilities are usefulfor making self-interested choices because theyenable people to predict others’ actions more

accurately. However, empathy is also likely to

render people less selfish because it allows thesharing of emotions and feelings with othersand therefore motivates other-regarding behav-ior. In fact, neuroscientific empathy experi-ments indicate that the same affective braincircuits are automatically activated when wefeel pain and when others feel pain. Therefore,

empathy renders our emotions other-regarding,which provides the motivational basis for other-regarding behavior.

I. Mind-reading

For the past several decades, research in de-velopmental psychology, social psychology,and cognitive neuroscience has focused on thehuman ability to have a “theory of mind” or to“mentalize” (e.g., Uta Frith and Christopher D.Frith, 2003), that is, to make attributions about

the mental states (desires, beliefs, intentions) of others. This ability is absent in monkeys andonly exists in a rudimentary form in apes(Daniel J. Povinelli and Jess M. Bering, 2002).It develops by about age 5 and is impaired inautism. The lack of a theory of mind in mostautistic children could explain their observedfailures in communication and social interac-tion. Recent imaging studies on normal healthyadults have focused on the ability to “mental-ize” and have used a wide range of stimuli

which represented the intentions, beliefs, anddesires of the people involved (for a review, seeHelen L. Gallagher and Frith [2003]). Severalrecent studies, for example, involved the brainimaging of subjects while they played strategicgames (Kevin McCabe et al., 2001; Gallagher etal., 2002; Meghana Bhatt and Camerer, 2005)with another partner outside the scanner room.The first two studies examine the brain areasinvolved when a subject plays against an inten-tional actor (i.e., another person) as compared toplaying against a computer. The study by Bhattand Camerer explicitly examines brain activity

† Discussants: David Laibson, Harvard University; ColinF. Camerer, California Institute of Technology; Kevin Mc-Cabe, George Mason University. A third paper, “The Vul-canization of the Human Brain: The Neural Bases of Cognitive-Emotion Interactions in Decision,” by JonathanCohen, was presented at the meeting session but is not beingpublished in the Papers and Proceedings.

* Singer: Wellcome Department of Imaging Neuro-science, 12 Queen Square, WC1N 3BG London, UnitedKingdom (e-mail: [email protected]); Fehr: Institutefor Empirical Research in Economics, Blumlisalpstrasse 10,8006 Zurich, Switzerland (e-mail: [email protected]).

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in choice tasks and belief formation tasks. Allthese studies have repeatedly demonstrated theinvolvement of one brain area, a part of themedial prefrontal lobe called the anterior parac-ingulate cortex. This brain area is not only in-

volved when mentalizing about the thoughts,intentions or beliefs of others, but also whenpeople are attending to their own states. Frithand Frith (2003) suggest that this area subservesthe formation of decoupled representations of beliefs about the world, “decoupled” in thesense that they are decoupled from the actualstate of the world and that they may or may notcorrespond to reality.

A related line of research has focused on theinvestigation of the neural mechanism underly-

ing our ability to represent others’ goals andintentions by the mere observation of their mo-tor actions. This notion stems from the findingthat there are neurons in the premotor cortex of the macaque brain that fire both when the mon-key performs a hand action itself and when itmerely observes another monkey or a humanperforming the same hand action (GiacomoRizzolatti et al., 1996). It has been suggestedthat these “mirror neurons” represent the neuralbasis for imitation. Thus, when we imitatesomeone, we first observe the action and then

try to reproduce it. But how do we transformwhat we see in terms of perceptual input intoknowledge of what we need to do in terms of motor commands? The discovery of mirror neu-rons demonstrated that a translation mechanismis present in the primate brain and automaticallyelicited when viewing others’ actions. More-over, Vittorio Gallese and Alvin Goldman(1998) suggest that this mirror system mightunderlie our ability to share others’ mentalstates, providing us with an automatic simula-

tion of their actions, goals, and intentions. Asimilar common coding of the production andperception of motor action has been demon-strated in the human brain using imaging tech-niques such as PET and fMRI since thediscovery of these “mirror neurons” (for a re-view, see Julie Grezes and Jean Decety [2001]).

II. Empathy

In addition to the ability to understand mentalstates of others, humans can also empathizewith others, that is, share their feelings and

emotions in the absence of any direct emotionalstimulation to themselves. Humans can feel em-pathy for other people in a wide variety of contexts: for basic emotions and sensationssuch as anger, fear, sadness, joy, pain, and lust,

as well as for more complex emotions such asguilt, embarrassment, and love. The idea that aneural system enables people to share others’mental states has recently been expanded toinclude the ability to share their feelings andsensations (e.g., Stephanie D. Preston and FransB. M. de Waal, 2002). How can we understandwhat someone else feels when he or she expe-riences emotions such as sadness or happiness,or bodily sensations such as pain, touch, ortickling, in the absence of any emotional or

sensory stimulation to our own body? Influ-enced by perception–action models of motorbehavior and imitation, Preston and de Waal(2002) proposed a neuroscientific model of em-pathy, suggesting that observation or imagina-tion of another person in a particular emotionalstate automatically activates a representation of that state in the observer with its associatedautonomic and somatic responses. The term“automatic” in this case refers to a process thatdoes not require conscious and effortful pro-cessing, but which can nevertheless be inhibited

or controlled.Imaging studies in the last two years have

started to investigate brain activity associatedwith different empathic responses in the domainof touch, smell, and pain. The results have re-vealed common neural responses elicited byobservation of pictures showing disgusted facesand smelling disgusting odors oneself (BrunoWicker et al., 2003) and by being touched andobserving someone else being touched in avideo (Christian Keysers et al., 2004). Another

study could identify shared and unique net-works involved in empathy for pain (Singer etal., 2004b). We will explain the latter study inmore detail in order to illustrate how empathicresponses can be measured using functionalMRI.

In this study, couples who were in love witheach other were recruited; empathy was as-sessed “in vivo” by bringing both woman andman into the same scanner environment. Morespecifically, brain activity was assessed in thefemale partner while painful stimulation wasapplied either to her own or to her partner’s

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right hand via electrodes attached to the back of the hand. The male partner was seated next tothe MRI scanner, and a mirror system allowedthe female partner to see both her own and herpartners’ hands lying on a tilted board in front

of her. Flashes of different colors on a bigscreen behind the board pointed either to herhand or that of her partner, indicating which of them would receive the painful stimulation andwhich would be subject to the non-painful stim-ulation. This procedure enabled the measure-ment of pain-related brain activation when painwas applied to the scanned subject (the so-called “pain matrix”) or to her partner (empathyfor pain).

The results suggest that some parts, but not

the entire “pain matrix,” were activated whenempathizing with the pain of others. Activity inthe primary and secondary somato-sensorycortex was only observed when the subjectwas receiving pain. These areas are known tobe involved in the processing of the sensory-discriminatory components of our pain experi-ence; that is, they indicate the location of thepain and its objective quality. In contrast, bilat-eral anterior insula (AI), the rostral anteriorcingulate cortex (ACC), brainstem, and cerebel-lum were activated when subjects either re-

ceived pain or a signal that a loved oneexperienced pain. These areas are involved inthe processing of the affective component of pain, that is, how unpleasant the subjectivelyfelt pain is. Thus, both the experience of pain tooneself and the knowledge that a loved partnerexperiences pain activates the same affectivepain circuits, suggesting that if a loved partnersuffers pain, our brains also make us suffer fromthis pain. These findings suggest that we userepresentations reflecting our own emotional re-

sponses to pain to understand how the pain of others feels. Moreover, our ability to empathizemay have evolved from a system which repre-sents our own internal feeling states and allowsus to predict the affective outcomes of an eventfor ourselves and for other people.

The results of the Singer et al. (2004b) studyfurther suggest that the empathic response israther automatic and does not require activeengagement of some explicit judgments aboutothers’ feelings. The scanned subject did notknow that the experiment was about empathy;subjects were just instructed to do nothing but

observe the flashes that indicate either pain tothe subject or the loved partner. The analysisalso confirmed that the ability to empathize isheterogeneous across individuals; standard em-pathy questionnaires and the strength of the

activation in the affective pain regions (AI andACC) when the partner received pain were usedto assess this heterogeneity. Interestingly, indi-vidual heterogeneity measured by the empathyquestionnaire was highly correlated with indi-vidual differences that were measured by brainactivation in AI and ACC. Thus, neural evi-dence and questionnaire evidence on empathyreinforce each other.

Does empathy also extend to unknown per-sons? The results of three recent studies indicate

that empathic responses are also elicited whenscanned subjects do not know the person inpain. Activity in ACC and AI has also beenobserved when subjects witness still picturesdepicting body parts involved in possibly pain-ful situations (Philip L. Jackson et al., 2005) orvideos showing a needle stinging in the back of a hand (India Morrison et al., 2004). At themoment, Singer and collaborators are investi-gating whether the level of empathic response inACC and AI can be modulated by whether thesubject likes or dislikes the “object of empa-

thy.” In this study, actors are paid to pretend tobe naive subjects participating in two indepen-dent experiments, one on “social exchange” theother one on the “processing of pain.”

In the first experiment, the two confederatesrepeatedly play a sequential Prisoner’s Di-lemma game in the position of the secondmover with the scanned subject. One actor playsa fair strategy and usually reciprocates cooper-ative first-mover choices with cooperation; theother actor plays unfairly and defects in re-

sponse to first-mover cooperation most of thetime. Based on behavioral and neuronal findingsof a previous imaging study which revealedverbally reported liking and disliking as well asemotion-related brain activation in responses tofaces of people who had previously cooperatedor defected (Singer et al., 2004a), we expect toinduce subjects to like fair players and to dislikeunfair ones.

In the second part of the experiment, all threeplayers participate in a pain study that expandsthe approach by Singer et al. (2004b). One actorsits on each side of the scanner, enabling the

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scanned subject to observe flashes of differentcolors indicating high or low pain stimulation tohis/her hand or to those of the fair or unfairplayers. We predict empathy-related activationin ACC and AI when observing the unfamiliar

but likeable person receiving painful stimula-tion. However, based on the results of a recentimaging study that reports reward-related activ-ity when players could punish defectors in asequential Prisoner’s Dilemma game (Domin-ique DeQuervain et al., 2004), we further pre-dict a lack of empathy-related brain activationand an increase in activity in reward-relatedareas when perceiving a previous defector get-ting pain, that is, getting punished. Such a pat-tern of results would contribute to the

microfoundation for theories of social prefer-ences. These theories suggest that people’s val-uations of other players’ payoffs depend on thefairness of their previous behavior (Fehr andSimon Gachter, 2000): many people value oth-ers’ payoffs positively if others behaved fairly;however, people also value others’ payoffs neg-atively if they behaved unfairly. This pattern of preferences implies that people prefer cooperat-ing with fair opponents while favoring the pun-ishment of unfair opponents.

III. Implications for Economics

Mind-reading and empathy are two lines of research which have recently emerged in socialneuroscience. Even though these abilities seemto rely on different neural circuitries, the con-cepts do in fact have common features. Bothallow humans to represent states of other peo-ple: others’ intentions, beliefs, and thoughts ortheir feeling states based on emotions and sen-sations. These abilities enable people to predict

others’ behavior and, therefore, help them meettheir individual goals. As an example, imaginethat you are a first mover in a social exchangesituation like the sequential Prisoner’s Di-lemma. Your attempt to predict whether theopponent will reciprocate a cooperative choicewill rely on your belief about his type (i.e.,whether you believe him to be a fair person witha desire to reciprocate or not). However, if youbelieve that the other person is a reciprocator,you also need to understand his actual feelingand motivational state. If, for example, the otherplayer is angry because you repeatedly violated

his sense of fairness, he will probably not re-ciprocate your trust. Your capacity to empa-thize, that is, to simulate the internal stateresulting from being cheated in a social ex-change will help you to predict the opponent’s

likely action. Thus, the ability to empathize isuseful from a self-interested point of view.However, the very ability to empathize mayalso undermine purely self-interested choicesand may promote other-regarding behavior. Infact, there is evidence (Nancy Eisenberg andP. A. Miller, 1987) suggesting that affectiveconcern for others and perspective taking ispositively related to prosocial behavior (definedas voluntary behavior intended to benefitothers).

An important feature of the outlined mecha-nisms is that they mostly rely on automaticprocesses. We represent the goals of others interms of our own goals, without even beingaware of it. Without thinking, the perceivedfeelings of others automatically activate brainnetworks that also represent our own feelingstates; we automatically share other people’sfeelings. Thus, as our own feelings and emo-tions are important determinants of our motives,our behavior may be automatically other-re-garding unless we inhibit the other-regarding

impulses. Therefore, empathic concern may es-tablish a link between the ability to predictothers’ motives and the nature of own motives,that is, other people’s emotions may partlyshape our own motives toward them. To pro-vide an example: if shown a picture of a mal-nourished child with a swollen belly, manypeople empathize with this child and are there-fore willing to incur cost to help the child (e.g.,by donating money to charities that operate inthird-world countries).

The study by Singer et al. (2004b) suggeststhat there are individual differences in empathicabilities. Therefore, the hypothesized link be-tween empathic abilities and the prediction of other players’ motives and actions suggests atestable prediction: people with stronger em-pathic abilities are better predictors of others’motives and actions. Moreover, the hypothesisthat empathy enhances other-regarding behav-ior in combination with the existence of indi-vidual differences in empathy suggests thatpeople who exhibit more affective concern aremore likely to display altruistic behaviors. In




analogy to the findings of Singer et al. (2004b)we also predict that people with higher scores intheir perspective-taking ability should displayhigher activation in areas shown to be activatedby “theory of mind” tasks (e.g., mPFC), and

consequently these people should also be betterin predicting the actions of others. An interest-ing question for future research is to determinethe relative importance of our ability to empa-thize and to mentalize for the prediction of motives and actions of others in differentsituations.

Neuroscientific research on mentalizing andempathizing may also help explain how indi-viduals actually assess other players’ types ingames with incomplete information about pref-

erences. Economists take a technical shortcut ingames with incomplete information by assum-ing a common prior distribution over players’potential preferences (“types”). While thisshortcut has enabled economists to solve gameswith incomplete information, the question aboutthe determinants of this prior probability distri-bution has not been addressed. In fact, the as-sumption of a prior distribution over typesconstitutes a huge black box. Neuroeconomicresearch may help us to understand what isgoing on in this black box.

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Neuroeconomics of Mind Reading and Empathy