Kirznerian Alertness and Neuroscience

January 9, 2009

by Roger Koppl

Jake Young of Pure Pedantry has a nice post using the neuroscience of preconscious processing to address the issue of Kirznerian alertness.  He was responding to Sandy’s post, “Stumbling on Profit Opportunities.”  Jake gives a negative reply to Sandy’s conjecture that preconscious processing, whereby we leap away from a snake before processing that it was a snake, might be an example of Kirznerian entrepreneurship.

I think it’s a mistake to look for “the” neuroscience correlate to entrepreneurial alertness.  The praxeological categories of “entrepreneurship,” “alertness,” and “discovery” were constructed for use in social science, not neuroscience.  It would be a surprise if there were precisely one process identified in neuroscience that covers all and only cases of entrepreneurial alertness in social science.  More likely, several processes that are considered distinct and unrelated in neuroscience would all be examples of entrepreneurial alertness and discovery.  And the neurological processes generally corresponding to entrepreneurial discovery might sometimes be activated when there is no entrepreneurial discovery.  Why should social science and neuroscience carve up the world in the same way?

Having said all that, it seems to me that preconscious processing fits entrepreneurial discovery quite nicely in at least some cases, including the snake example.  In “What is Alertness?” I explore the concept of alertness using a similar example from Schutz and Luckmann (The Structures of the Life World, Evanston, Illinois: Northwestern University Press, 1973, p. 185).  In their example, a man enters an ill-lit room and must decide whether the coiled structure in the corner is rope or a snake. The example comes from Diogenes’ student Carneades.

Kirznerian entrepreneurship is a human universal.  Basically, it’s our capacity to change plans.  Thus, the context is not always markets and the “profit opportunity” is not always money.  The “profit” may be gaining a reward or avoiding a loss.  Jumping away from a snake fits perfectly, IMHO.  You’re executing your plan to walk down the trail.  You see the snake and change plans by leaping away.  You weren’t looking for the snake; you discovered it. 

The snake example has an interesting dimension that Carneades, Schutz, and Luckmann are not likely to have considered.  We are probably pre-programmed to be afraid of snakes or to easily acquire such a fear through social conditioning.  Thus, you know to leap out of the way because in some sense you were already expecting snakes to threaten you.  We are more alert to the danger of snakes than to many other threats and opportunities because our biological programming (perhaps aided by social conditioning) puts us on alert to that danger.  More generally, we are predisposed to notice some opportunities and not others.  In this sense we are alert only to that which we already expect in some broad sense.  Hayek’s treatment of “attention” in The Sensory Order (p. 139) fits.  “Attention is . . . always directed, or confined to a particular class of events for which we are on the look-out and which, in consequence, we perceive with greater distinctness when one of them occurs.”

I think Sandy was right to conjecture that preconscious processing may often be a form of entrepreneurial alertness.  More generally, I really liked Sandy suggestion that we should think about how to link Kirznerian entrepreneurship to neuroscience and empirical psychology.

7 Responses to “Kirznerian Alertness and Neuroscience”

  1. Jake Young Says:

    I certainly agree with your assessment that social science and neuroscientific categories will not map well onto one another. In respect to the mechanism for EA, I think most neuroscientists would agree that it the result of many interacting brain processes.

    I didn’t have time to talk about this in the previous posts, but one of the things that I find very interesting about this concept of EA — I hadn’t ever heard of it before — is the word “alertness.” Though I am obviously a lay person in this area, I take the word alertness to mean “a special attention to specific details.”

    In neuroscience, attention has a very specific meaning. Attending to objects is the result of both a top-down process of assigning reward to particular stimuli based on prior experience, and a bottom up process of deriving the relevance of those stimuli based on their relevance in the context. (I won’t bore you with the way the brain does this, but sufficeth to say it is again a set of interacting parrellel processes.)

    Most neuroscientists don’t think about it this way, but I have always visualized this interaction of top-down and bottom-up processes that produce attention through Hayek’s concept of spontaneous order. Each component in this system operates according to defined rules, but the actual result — the thing attend to — is not necessarily predictable a priori.

    Attention emerges as prices emerge in the markets — through the interaction of many elements.

    The reason that I de-emphasized the snake example as explaining Kiznerian entrepreneurship is that attention — in the neuroscientific meaning — requires consciousness. You have to attend to something to be conscious of it. Thus, Kizner’s use of the word “alertness” and my interpretation of that word to mean “attention” suggests to me that it is primarily conscious rather than preconscious processing that is involved.

    But this is indeed all conjecture. I could totally be wrong. I am not aware of anyone who has looked into entrepreneurial ideas in the brain. It would surprise me if someone had because neuroeconomics is a new discipline. But I totally agree that these kinds of cross-over ideas are a fascinating and fruitful area of research.

    Neuroscientists/psychologists and economists need to talk. In our lab, we study the neural basis of decision making, and economics has A LOT to say about that subject. This is why I have actually been taking night school classes in economics to supplement my knowledge🙂

  2. Sandy Ikeda Says:

    A point of clarification. While I am curious about what experimental psychology can tell us about entrepreneurship, I am not equating experimental psychology with neuroscience. I suspect, or hope, that there are other legitimate ways to do the former than the latter. In particular, I’m not yet persuaded of the usefulness of so-called “neuro-economics” as a way of understanding economic phenomena such as entrepreneurship. From what I’ve seen so far, neuro-economics is simply applied neuroscience, not economics. Actually, Roger, you state my position pretty accurately in the second paragraph of your post.

  3. koppl Says:

    Interesting! I think you might like Hayek’s 1952 book, _The Sensory Order_. It gives a connectionist account of mind pretty close to Hebb 1949. Some neuroscientists rave about it, for example Edelman and (separately) Fuster. I haven’t read Hebb, but it seems Hayek does a better job pulling out the philosophical implications of that sort of connectionist model.

    Your suggestion that the brain is a kind of spontaneous order is spot on, as it your comment on predictability. Hayek constructs a kind of Cantorian diagonal argument to explain why we can’t fully explain and predict the thoughts or actions of others. Today we have the algebraic complexity theory of figures such as Chaitin and Solomonoff that gets to some of the same issues.

    I assume you know of Glimcher’s work too?

  4. koppl Says:

    Sandy,

    I’m pretty much into neuroeconomics. This article:
    McCabe, Kevin A.; Houser, Daniel; Ryan, Lee;
    Smith, Vernon L. and Trouard, Theodore. “A
    Functional Imaging Study of Cooperation in
    Two-person Reciprocal Exchange.” Proceed-
    ings of the National Academy of Sciences,
    September 25, 2001, 98(20), pp. 11832–35.1089 –122.

    shows that we use our evolved theory of mind module when playing games. That’s a real-live social-science result IMHO. It is true, however, that I have been castigated as a “neuro-Hayekian”! Anyway, neuroscience is not, of course, the only way to go. We take the truth wherever we find it!

  5. Jake Young Says:

    Sandy,

    It wasn’t my intent to conflate psychology and neuroscience. Psychology is to neuroscience much of what macroeconomics is to microeconomics. We just deal with issues of a completely different scale.

    With respect to the issue of neuroeconomics…well…I personally think that economics can inform neuroscience much more than neuroscience can inform economics. There are some who believe that neuroscience will eventually explain the ways in which actors fail to act according to classical predictions and thus help create a more psychologically accurate macroeconomic synthesis. I am not one of them.

    Nothing I have read about economics or neuroscience has convinced me that the psychological deviations from classical predictions identified neuroeconomics — such as, for instance, time preference being hyperbolic rather than exponential — would not vanish when people are considered in aggregate. I believe that long-term classical predictions hold in aggregate even if they do not always hold in individuals. But I digress…

    Neuroeconomics is applied neuroscience. It is trying to understand the mechanism for a particular class of human behaviors, and there is a reason that most neuroeconomists have a neuroscience rather than an economics background.

    The reason that I thought I would chime in is that questions like entrepreneurial alertness do have very intriguing neuroscientific connotations.

    Robert,

    It’s funny that while Hebb and Hayek came up with a connectionist model of synaptic function independently at around the same, very few neuroscientists appreciate Hayek’s work. (My personal explanation for this: most scientists tend towards liberal, Keynesian beliefs with respect to economics and politics, and thus consider Hayek tainted goods.) I have read many of Fuster’s papers. He is definitely rare as far as neuroscientists go in recognizing the significance of Hayek’s work in neural function. (The Sensory Order is on my list, but I haven’t gotten to it yet. I am still mired in Human Action :))

    The argument that you can’t fully understand or predict what another person is thinking is one that I have made repeatedly over at ScienceBlogs with a mixed reception (such as here).

    This is one reason that I like Gilbert’s book so much. He argues that happiness is a non-transitive properity of human life: you cannot understand what makes someone else happy. This realization has huge neuroscientific and economic implications. If you were to try and craft a government policy to improve human happiness, yet you cannot place yourself in someone else’s shoes, of what use is that policy?

    I am familiar with both McCabe and Glimcher’s work, and I am particularly interested in their stuff about intertemporal choice. I am little skeptical of fMRI studies for technical reasons, but I love the primate recordings.

  6. Jake Young Says:

    Sorry. I meant Roger, not Robert.

  7. Sandy Ikeda Says:

    Jake,

    Sorry, I’m not saying that you’re conflating applied psychology with neuroscience…I don’t think you are at all. I was really responding to my good friend Roger’s remarks. Indeed, I think my position on the value of neuro-economics qua economics is much closer to yours.

    BTW, I’m very happy that you came upon this post and ThinkMarkets in general. Attracting someone who is able to address these issues with your background is exactly what I was hoping to do — thanks!

    Now, I’m going to stop writing here and listen (and read some more) because I’m out of my depth.


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