Advancing Neuroeconomics through Brain-Computer Interfaces

By: John Rho


You may have heard of BCIs, or brain-computer interfaces, before. Whether it be brainwave-reading toys from our childhood like Mindflex or cochlear implants that can restore hearing, these devices fall on a complicated spectrum ranging from gimmicky to life-changing. One may imagine the possibilities of brain-controlled devices that could change the way people interface with technology. Is the widespread adoption of BCIs still more science fiction than concrete near-term innovation?


Though some promises currently appear overly ambitious, the BCI industry is poised to grow rapidly, with the possibility of changing how individuals interact with the natural world. For example, the global BCI Industry is estimated at 284.1 million USD, growing with a projected compound annual growth rate of 12.9 percent from 2021 to 2026. Major companies like Emotiv Inc., BrainCo, and Neuralink have made large strides in developing consumer-grade devices. In recent news, Elon Musk’s Neuralink scored 205 million USD in Series C funding, and the company is looking to soon test brain-controlled devices for quadriplegics. Musk’s company gained attention in Spring 2021 for testing on a monkey that could play Pong with its mind. Moreover, its first product, the N1 Link, is intended to be completely invisible once implanted into the brain and will transmit information wirelessly. These BCIs can collect information like electroencephalogram (EEG) data that measures the electrical activity of firing neurons. In essence (but without diving too deeply into the science here), this electrical activity suggests the parts of the brain that are being activated based on certain thoughts/actions users are taking. The analysis of these electrical signals allows these devices to “read” the inner workings of the brain that are otherwise hidden.

Short-term applications are primarily medical in nature, but if the adoption of these technologies becomes widespread (as smartphones did in the early 21st century), companies could explore new behaviorally grounded market research and methods.


For background, behavioral economics differs from classical economics in that behavioral approaches consider the subjective culture, education, and tastes that impact consumer rationality. Notably, studies show that humans are less likely to take risks when gains are certain and more likely to take risks when losses are certain in decision-making. When tasked between getting $1000 with certainty or having a 50% chance of getting $2500, individuals often choose the guaranteed $1000, in spite of the technically higher expected return of $1250 for the latter option. Yet, when confronted with a certain loss of $1000 versus a 50% chance of no loss or a $2500 loss, people often choose the riskier alternative, as Figure 1 highlights.


Figure 1: Behavior research has shown that individuals are more likely to take risks when losses are certain and less likely to take risks when gains are certain.


Neuroscience explains how the human brain computes the value of certain gains and losses. Specifically, reference dependence explains how humans perceive rewards relative to the status quo, rather than based on absolute gain/loss. By analyzing the mechanisms behind this psychology, researchers can understand the behavioral implications on the economic markets at large. One potential use case is the collection of neural data (like EEG data) from these BCIs toward predicting the choices that consumers make in the markets. Practical, neuro-physical data solidifies the real-world implications for people and businesses looking to predict market movements, adding more substance to the typically subjective field of economics: rather than rely on surveys of individuals or historical trends based on certain stimuli, BCIs can provide researchers and economists with real-time emotional data straight from the source.

Imagine a future in which every human being is implanted with a Neuralink-esque device, reading neural data constantly while connected to the Internet. Of course, one of the first concerns relates to privacy and security. In an age where companies like Facebook and Google are notorious for collecting and selling consumer data, having direct access to human thoughts can be an unnerving prospect. One study explored the analysis of brain activity to foreshadow stock price movements, for example. Financial firms, using data from these BCIs, can better read investor sentiment, using this information to execute transactions at a lightning-fast rate. Such new technology in the financial landscape could mean huge changes in how the market operates. In a world where sentiment on particular companies is concrete and readily available, predicting market movements, at least on paper, would become much more scientific and easily explainable.


Up to this point, the discussion has been centered around existing research as well as clear implementations of already developed/developing technologies. But diving more into the science fiction side of BCI-based economics, there is high potential for a widespread overhaul of how humans digest and act on financial information (assuming BCIs can fully read one’s brain state and ignoring future legislation, which is difficult to predict). Of course, it is difficult to say that this technology will be available in the near future. Most likely, such advancements are many, many decades away (as mentioned earlier, BCIs are on a path for more medical-related applications in the short-term, and it is hard to say that a widespread adoption of implantable brain chips will become the status quo anytime soon). BCIs could separate the logical- and primal-level thought processes of the human mind. Several authors (like Ray Dalio, in reference to his Principles) promote the understanding of higher-level vs. lower-level thinking to make more informed business decisions. BCIs can be the next step in helping people make more informed and logical decisions. Say you are making a high-stakes decision, such as deciding whether to invest millions of dollars into a particular startup as a venture capitalist. A BCI could help you understand how your brain is functioning, differentiating between anxiety/fear-driven biases versus careful, logical conclusions. This example is simplified (sometimes, as we know, intuition reigns supreme over logic anyways, given the data we have available--although that is another field BCIs can revolutionize). On that topic, BCIs can facilitate near-instantaneous sharing of information -- literally just a thought away. There are immense possibilities with all financial information about a particular company available instantaneously in combination with immediate action steps (like trading a particular stock or option), all based purely through human thoughts. Plus, as artificial intelligence advances, there is potential for fast AI-aided decision-making.


BCIs have the potential to help people gain knowledge about news and themselves instantaneously. Though widespread adoption of the technology is likely many decades away, such speculation should invite much excitement, especially given BCI’s potential to reimagine how we make and monitor economic decisions.



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