Using advanced tools to see the human brain at work, a new generation of marketing experts may be able to test a product’s appeal while it is still being designed, according to a new analysis by two researchers at Duke University and Emory University.

So-called “neuromarketing” takes the tools of modern brain science, like the functional MRI, and applies them to the somewhat abstract likes and dislikes of customer decision-making.

Though this raises the specter of marketers being able to read people’s minds (more than they already do), neuromarketing may prove to be an affordable way for marketers to gather information that was previously unobtainable, or that consumers themselves may not even be fully aware of, says Dan Ariely, the James B. Duke professor of psychology and behavioral economics at Duke.

In a perspective piece appearing online in the journal Nature Reviews Neuroscience , Ariely and Gregory S. Berns of Emory’s departments of psychiatry, economics and neuropolicy, offer tips on what to look for when hiring a neuromarketing firm, and what ethical considerations there might be for the new field. They also point to some words of caution in interpreting such data to form marketing decisions.

Neuromarketing may never be cheap enough to replace focus groups and other methods used to assess existing products and advertising, but it could have real promise in gauging the conscious and unconscious reactions of consumers in the design phase of such varied products as “food, entertainment, buildings and political candidates,” Ariely says.

“Neuromarketing: the hope and hype of neuroimaging in business,” Dan Ariely and Gregory S. Berns. Nature Reviews Neuroscience.

New work by Duke and University College London (UCL) researchers suggests that our response to disasters depends partly on the range of death tolls we are usually exposed to.

Millions of lives are lost around the world each year to accidents, terrorist attacks, wars, epidemics and natural disasters. What’s more, the prediction is that climate change will increase the number and intensity of some of these events.

Newly published research from suggests that the way people – whether members of the public or policymakers – react when faced with human fatalities is highly dependent on the distribution of death tolls they are typically exposed to.

The findings could have important implications for multi-lateral donors, national governments, aid agencies and the press in terms of planning for, fundraising for, reporting on and responding to such emergencies. Read the rest of this entry »

Professor Ralph Keeney is helping Freakonimics blog readers learn to make better decisions.  Check out the Freakonomics site for Keeney’s guidance on how to make good decisions and minimize regret.

by Kevin Schulman

One of the most obscure organizations in the federal government is the U.S. Preventive Services Task Force which began in 1984. While convened by the government, the group is comprised of outside experts in medicine, health services research, and epidemiology.1 The task force’s job is to review the evidence around primary care services and to make recommendations to physicians about the quality of the evidence to support specific recommendations for what services should or should not be included as part of routine clinical practice.

The group’s efforts are very disciplined and scripted. Specific services are assessed on the basis of the risks and benefits to ascertain the potential “net benefit” to patients, with recommendations graded A through D (a grade of I means there is insignificant evidence to make a recommendation). A grade of A indicates high probability there is substantial benefit, B indicates high probability of moderate benefit or moderate probability of substantial benefit, C is a recommendation against a service with at least moderate evidence that the benefit is small, D is a recommendation against a service with a moderate or high evidence that there is no benefit or that the harms outweigh the benefits. The probability estimates in these statements are based on the quality of the evidence in the clinical literature on these topics.2

This group recently performed a periodic update of its 2002 recommendations for breast cancer screening.3 The task force conducted an evidence review to assess all of the new clinical studies on breast cancer screening since its last report, and it commissioned a decision analysis of different screening strategies for breast cancer to assess the net benefit or harm for each strategy.

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The Washington Times recently featured  Aaron Chatterji and Christopher Gergen’s views on ways in which successful social enterprises can scale up to serve larger populations.  Read their column here.

The Raleigh News & Observer recently featured Professor (and physician) Marco Huesch’s thoughts on health care reform, highlighting ways in which physicians can lead innovation.  Read his thoughts here.

By Paul Zipkin

Here we are in early fall, 2009. It was a fairly calm summer. There were no major financial disasters. The stock market revived somewhat. The economy is still troubled, but compared to the unremittingly awful news during the previous year, it’s been a good time. I believe some credit for this happy turn of events is due to the bank stress tests conducted by the government during the spring.

The tests calculated what would happen over the next couple of years under two scenarios, a base-case scenario and a bad scenario reflecting worse economic conditions. They considered each bank’s entire position, not just standard deposits and loans but also fancy mortgage-backed securities and swaps. The question was, how much capital would each bank need to continue operating normally under the bad scenario?

The method itself is not at all novel. Many businesses, military forces and other organizations do this sort of scenario planning all the time. No one knows exactly what will happen in the future, so it makes sense to simulate several possible futures, to estimate whether the organization’s plans are robust.

But, amazingly, this was the first time the government conducted such a test of our financial system. We do have elaborate financial regulations, but those specify procedures and check whether they have been followed. In other words, they look backwards, not forwards. To look ahead at several plausible scenarios, the exact same ones for all banks, and to include all the banks’ exposures – that was unprecedented. Of course, the inspiration for the stress tests was the sequence of ugly surprises in 2008. Nobody knew how dire the situation was at Lehman and the others until it was too late.

Banks are supposed to do this sort of thing for themselves, of course, but it’s not clear how seriously they take these “risk management” exercises. Anyway, they are not required to use the same methods and certainly not to make the results public.

Before the results were revealed, many observers criticized the tests. The tests were not rigorous enough, the bad scenario was too tame, they said. (The Treasury invited some of this carping by calling the bad scenario the “worst-case” scenario. It was not that.) But the criticism largely fell silent once the tests were complete and the results announced on May 7.
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Professor Paul Zipkin argues “regulation is a necessary element of the infrastructure of free enterprise,” in an op-ed published in the Sept. 24 edition of the Raleigh News & Observer.

Defective financial products can ruin lives just as surely as bad food and faulty electrical wires. Just ask the millions of borrowers who can never hope to pay their debts, the thousands of laid-off financial professionals and factory workers, and all of us taxpayers.

The Obama administration has proposed several initiatives to help our damaged financial system. One is the Consumer Financial Protection Agency. The CFPA aims to avoid some of the ill-conceived products, such as tricky subprime mortgages, that have played central roles in the financial crisis. It’s a good idea, and we should all support it.

Bankers too should support this idea, and some do, privately. Publicly, however, the banking industry has mobilized its considerable forces to oppose the CFPA. They argue that it will hamper financial innovation. Well, that’s sort of true – in a good way. Some innovations are valuable but some are not. Read the rest of this entry »

As manufacturers race to test and deliver the H1N1 influenza vaccine by October, public health officials are working equally feverishly to determine how scarce doses should be allocated, and the U.S. has announced plans to donate 10 percent of its vaccine supply to the WHO.

Research from Duke and the European School of Management and Technology (ESMT) demonstrates why, in some cases, countries would be best served by giving their drug supplies to another country.

Duke Professor Peng Sun, Duke PhD student Liu Yang, and Professor  Francis deVericourt  of ESMT created a model based on game theory  to test how countries with adequate drug supplies should react to an epidemic affecting a neighboring country with little or no supply of vaccine or treatments.  Their findings indicate that countries possessing treatments are sometimes best served by donating their treatments to the first country afflicted by an epidemic, instead of using the drugs on their own citizens.  In game theory, this situation is referred to as a Nash Equilibrium, the combination of actions by different players that results in the best outcome each player can expect, given the other players’ moves.
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Is it easier to lie when you’re hiding behind knockoff sunglasses?  Dan Ariely explains how small acts of dishonesty can lead to more serious changes in behavior.