Can Economists Build Brands?

Recently in a conversation with my colleague Dr. Shamim Mandal we were discussing about higher education opportunities for Indian students at various U.S. universities. We concurred upon one point in this regard that beyond scholastic aptitude of the student it is the recommendation(s) that plays a major role.

Dr. Shamim and I hail from the same academic discipline - Economics, and thus essentially we focused on students majoring in Economics who wanted to go to U.S. for higher studies and research. The outcome of the discussion was that someone from India, essentially a bright scholar, sometime in the past would have impressed his American professor with his intellect and talent quotient so much that he became a hallmark and his recommendations can be relied upon without second thoughts. In the following years that bright scholar would create a legacy by recommending other Indian fellow mates and help them explore their pursuit of knowledge and success in the U.S.

Sukhamoy Chakravarty was one such brilliant and most trusted scholar of Paul Samuelson who can be attributed with the credit of creating a legacy of Indian economists at M.I.T. Similarly, Amartya Sen caught the attention of his professors and built his own brand at Stanford University.

Erotica & Economics

A brain-scan study may help explain what is going through the minds of financial titans when they take risky monetary gambles: sex.

When young men are shown erotic pictures, they are more likely to make larger financial gambles than if they are shown a picture of something scary, such as a snake, or something neutral, such as a stapler. The arousing pictures light up the same part of the brain that lights up when financial risks are taken.

These results have been brought out in a study involving 15 heterosexual young men at Stanford University, focused on the sex-and-money hub, the V-shaped nucleus accumbens, which sits near the base of the brain and plays a central role in what is experienced as pleasure. When that hub is activated by the erotic images, the men are far more likely to bet high on a random chance game that would earn them either a dollar or a dime.

Stanford psychologist Brian Knutson, a lead author of the study, says “it is all about the power of emotion and arousal and financial decisions. The trigger does not have to be sex - it could be chocolate or a winning lottery ticket”. To quote … the link between sex and greed goes back hundreds of thousands of years, to men's evolutionary role as provider or resource gatherer to attract women.

The study conforms to recent research that indicates men shown a pornographic movie are more likely to make riskier sexual decisions. Another suggests straight men think less about their financial future after being shown pictures of pretty women. One still-to-be-published study at Harvard University found a link between higher testosterone levels and financial risk-taking.But the study conducted at Stanford, funded by the National Institutes of Health, went deeper, using functional magnetic resonance imaging machines. It is part of a new but growing field called neuroeconomics that attempts to take the hard-wired science of brain biology and mix it with the softer sciences of psychology and economics to figure out why people make the financial decisions they do.

An earlier study by the same team found that the brain's reward area lit up at about the same time as risky decision-making. The erotic pictures experiment is designed to find which is the cause and which is the effect. The answer: Lighting up the reward area, in this case with soft-core pictures, caused the risk-taking. The more activation there you have, the more prone you are to taking more risk. It could be a feedback loop. The flip side is that the photos of snakes and spiders activated the portion of the brain often associated with pain, fear and anger. And those people are more likely to bet low.

This all makes sense to Harvard economist Terry Burnham, author of the book "Mean Genes". Burnham said it could be all summed up in a famous line from the movie "Scarface". "In this country, you gotta make the money first. Then when you get the money, you get the power. Then when you get the power, then you get the women."