Its a recent development that economists are turning to neuroscience to inform and enrich economic theory.  One controversial aspect is the potential use of neuroscience data to draw conclusions about welfare that go beyond traditional revealed preference.  It is nicely summarized by this quote from Camerer, Lowenstein, and Prelec.

The foundations of economic theory were constructed assuming that details about the functioning of the brain’s black box would not be known. This pessimism was expressed by William Jevons in 1871:

I hesitate to say that men will ever have the means of measuring directly the feelings of the human heart. It is from the quantitative effects of the feelings that we must estimate their comparative amounts.

Since feelings were meant to predict behavior but could only be assessed from behavior, economists realized that, without direct measurement, feelings were useless intervening constructs. In the 1940s, the concepts of ordinal utility and revealed preference eliminated the superfluous inter- mediate step of positing immeasurable feelings. Revealed preference theory simply equates unobserved preferences with observed choices…

But now neuroscience has proved Jevons’s pessimistic prediction wrong; the study of the brain and nervous system is beginning to allow direct measurement of thoughts and feelings.

There are skeptics, I don’t count myself as one of them.  I expect that we will learn from neuroscience and economics will benefit.  But, I think it is helpful to explore the boundaries and I have a little thought experiment that I think sheds some light.

Imagine a neuroscientist emerges from his lab with a theory of what makes people happy.  This theory is based on measuring activity in the brain and correlating it with measures of happiness and then repeated experiments studying how different activities affect happiness.  For the purposes of this thought experiment be as generous as you wish to the neuroscientist, assume he has gone as far as you think is possible in measuring thoughts and feelings and their causes.

Now the neuroscientist approaches his first new patient and explains to him how to change his behavior in order to achieve the optimum level of well-being according to his theory, and asks the patient to give it a try.  After a month of trying it out, imagine that the patient comes back and says “Doctor, I did everything you prescribed to the letter for one whole month.  But, with all due respect, I would prefer to just go back to doing what I was doing before.”

Ask yourself if there is any circumstance, including any imaginable level of neuroscientific sophistication,  under which after the patient tries and rejects the neuroscientist’s theory, you would accept a policy which over-rode the patient’s wishes and imposed upon him the lifestyle that the neuroscientist says is good for him.

If there is no circumstance then I claim you are fundamentally a revealed preference adherent.  Because the example (again, I am asking you to be as charitable as you can be to the neuroscientist) presents the strongest possible case for including non-choice data into welfare considerations.  We are allowing the patient to experience what the neuroscientist’s theory asserts to be his greatest possible state of well-being and even after experiencing that he is choosing not to experience it any more.  If you insist that he has that freedom then you are deferring to his revealed preference over his “true” welfare.

That’s not to say that you must reject neuroscience as being valuable for welfare. Indeed it may be that when the patient goes his own way he does voluntarily incorporate some of what he learned.  And so, even by a revealed preference standard could say that neuroscience has made him better off.  But we can clearly bound its contribution.  Neuroscience can make you better off only insofar as it can provide you with new information that you are free to use or reject as you prefer.

Drawing:  Anxiety or Imagination from