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Addictions – Retail Therapy

We’ve discussed the ventral striatum in this blog before. It’s a component of the brain involved in processing rewards in the brain. When you do something that makes you feel good, it helps to release a positive neurotransmitter such as dopamine.

Scientists believe that this rewards mechanism served an evolutionary purpose in that it helped reward people for trying and exploring the unknown. When the world was full of obvious harm, such a feature was dangerous, but it also helped to develop the drive to explore that helps to define humanity. However, in a modern world, where the wildest place many of us explore is the local mall, such instincts cause problems for us.

Marketing and sales build up products so they take on grand proportions. New and novel, these products play on that ancient brain response, triggering a positive sensation. Some indications link this response to stress relief, which can be addicting in itself depending on your personality type.

Our defense against this is the conscious brain. If something makes you feel good, ask why? Are you buying because of novelty? The tragic part of novelty is that it does resemble drugs. Eventually you build up a resistance, and you require more and different types to break through that resistance. That new novelty often costs more and more to achieve.

Don’t buy for novelty, buy for value and true pleasure, the results last much longer.

The neurobiology of risk: the ventral striatum

The ventral striatum is a relatively small area tucked deep inside the brain near the basal ganglia. Until recently, not much was known about it. But it’s recently been linked to reward, decisions, and risk, and as a result is getting much more press than it used to. It’s important in what we perceive as rewarding (such as status and keeping up with the Joneses) and how rewarding it is. It’s been linked to pathological gambling, and it matters when you’re thinking about what to do next with your portfolio.

The ventral striatum consists of two portions, the nucleus accumbens and the olfactory tubercle. Its most important neurotransmitter–to our current knowledge–is dopamine. Dopamine is associated with pleasure and with motor functions. (Dopamine-increasing drugs are used to treat Parkinson’s disease.) The ventral striatum is closely linked with the limbic system, which involves emotion and motivation: it receives input from it and sends output to it, mainly inhibitory. It’s thought that the ventral striatum helps to suppress certain mechanisms in the limbic system, thereby selecting the appropriate ones and silencing others.

When you consider all that, it’s a natural nominee for the reward center of the brain, and that seems to be its function. There have been several studies recently that look at different kinds of reward, and they all light up the ventral striatum. As described in the Society for Neuroscience, anticipating financial gain increases dopamine in the ventral striatum, which increases pleasure. Thinking about loss, on the other hand, decreases dopamine. It turns out that most people are more sensitive to decreases of dopamine than increases, which is where risk aversion comes from. The ventral striatum tells your limbic system that the behavior you’re considering is risky or that the loss you’ve just suffered is a bad thing, and the limbic system tells your conscious mind that it feels bad about what just happened, which affects your decision-making.

The ventral striatum is a tiny structure with big effects on our behavior. Most of decision-making, including financial decision-making, includes processing risk, which includes weighing rewards and losses. The ventral striatum is instrumental in modulating those behaviors and processes.

The Neurobiology of McMansions

How Our Brain Structures Led to the Housing Crisis


That is the derogatory term that arose the last few years for the large cookie-cutter suburban subdivisions that seem to have sprung up everywhere. You may have driven through these subdivisions and, much like me, wondered where so many people found so much money. I know what I make. I know I’m in the top 5% or so of income earners. So why don’t I have a top 5% McMansion?

In retrospect, it has become obvious that many of these people could not afford what they bought. This leads to the question of why they bought houses that pushed the limits of what they could pay. Blame it on their brains.

It is a sad but true statement about the human race that we don’t care about absolute wealth. We care about relative wealth – how much wealth we have compared to other people. We don’t want a higher standard of living if everyone else has it too. Some books would say it is all a result of an elaborate mating game. Women and men, in an ever more intense race to impress each other, attempt to make it look as though their income and success are much higher than they really are. But it goes deeper than that. The problem with the housing market can be blamed on the ventral striatum.

Last year, the neuroeconomics lab at Bonn released the results of a study or reward that involved scanning the brains of participants. What they found was not just that brains responded well to a reward. They found that brains responded even stronger to a reward that was better than the reward given to others. The experiment involved pairs of male volunteers competing for prizes on the same task. The BBC article about the research explains it well.

Both “players” were asked to estimate the number of dots appearing on a screen. Providing the right answer earned a real financial reward between 30 (£22) and 120 (£86) euros. Each of the participants was told how their partners had performed and how much they were paid. Using magnetic resonance tomographs, the researchers examined the volunteers’ blood circulation throughout the activities. High blood flow indicated that the nerve cells in the respective part of the brain were particularly active.

Neuroscientist Dr Bernd Weber explains: “One area in particular, the ventral striatum, is the region where part of what we call the ‘reward system’ is located. In this area, we observed an activation when the player completed his task correctly.”
A wrong answer, and no payment, resulted in a reduction in blood flow to the “reward region”. But the area “lit up” when volunteers earned money, and interestingly showed far more activity if a player received more than his partner.

This indicated that stimulation of the reward centre was not merely linked to individual success, but to the success of others.

You may have heard about “keeping up with the Joneses.” This research shows that it isn’t just something that affects a few of the more shallow among us. It is a real human need with a deeply rooted anatomical cause.

So back to the McMansions… what is a man to do… let all of his friends have the bigger, nicer, newer house? It seems that the drive of the ventral striatum outweighed the rational thought process for many people. All the while, lenders and investors, whose ventral striatums were firing like crazy as they tried to rack up larger earnings and returns, respectively, played along to satisfy that same deep seated need to be better than the next guy. The irony, or perhaps the karma, is that most of them ended up looking worse.