Forging new ground in neuroeconomics

Forging new ground in neuroeconomics

Dr. John McCarthy’s studies are forging new ground in neuroeconomics, with big implications for the understanding of how the structure of language shapes decisions.

By Alan Bisbort

The way Dr. John F. McCarthy tells it, ice hockey is responsible for his recent breakthrough in a new field of research called neuroeconomics.

As anyone who knows him will say, John “Doc” McCarthy is one of those charming raconteurs to whom you could listen all day and never hear the same story twice. With his broad smile and rich language, he could just as believably hold court in his lab atop Rudolph Bannow Science Center as at the local Irish pub. He is a throwback, in the best sense, a distinguished don who nonetheless does not stand on ceremony or expect people to praise him. Academia could use more like “Doc” McCarthy.

When he arrived in Fairfield as a young clinical psychologist in 1967, a group of students had just formed a club hockey team. Because Dr. McCarthy grew up in Lynn, Mass., where the hockey gene is transfered by the water supply, he thought he could hold his own with the younger players.

“I skated one game but realized they didn’t need a half-blind and frightened defenseman,” he said. “So, they asked me if I wanted to coach the team.”

Twenty-nine years later, Dr. McCarthy had compiled a 345-327-20 record and led the program from club league to varsity sport to competitive membership in the Eastern Collegiate Athletic Conference (ECAC), earning his 300th win in 1993. He was inducted into the Fairfield University Sports Hall of Fame in 2002.

“Hockey isn’t a sport; it’s a disease, like dermatitis,” Dr. McCarthy explained. “Once you contract it, you never stop itching.”

But, in Dr. McCarthy’s case, hockey was also a ticket to Europe. On two different exhibition tours with his team, he became fascinated with the German language. When he returned from the first tour, he took a course in German and then returned to Europe to study it. From the outset, he was struck by the language’s syntax – so different from the English he grew up speaking.

German sentences have a more structured word order than the typical subject-verb-object in English. Because of German’s syntax, the conjugated verb is typically in the second position, while the past participle or the infinitive is at the end of the clause or sentence; what English speakers consider to be vital information is saved until the very last sequence of words. Dr. McCarthy began to wonder whether native German-speaking people develop and use language differently than someone who grew up in, say, Lynn, Mass. And, if so, was there a way to measure any difference in cognition, decision-making, and problem solving?

The hypothesis he began with was, roughly, that native German-speaking people take more time to process information than native English-speaking people. He began referring to this as the “deliberative cognitive style” of native German speakers.

“I wondered if anyone had ever studied the relationship between syntax and cognition,” said Dr. McCarthy. After an extensive literature search, he presented, along with a student (Tyler Roskos ’00), his first paper on this topic in 1999 at an International Academy of Linguistics, Behavioral and Social Sciences conference in Las Vegas. The paper set his theory about cognitive delay in a theoretical framework.

Enter Lev Vygotsky (1896-1934), a legendary Russian/Soviet psychologist who emphasized the importance of culture.“Vygotsky’s ideas were our theoretical base,” Dr. McCarthy went on. “He stated that language is the internalization of culture. If people come from different cultures, they speak different languages. Since language is the means of representing internally external reality, thus not only do they speak a different language, they think differently. The next thing I began to wonder is ‘Can we do a study in a laboratory to measure this?’”

The initial challenge was to find enough native German-speaking subjects in the vicinity of Fairfield. Actually, it wasn’t as hard as one might have thought, as Fairfield County is a magnet for European au pairs. Soon enough, he had located 10 native German-speaking, college-aged (19-22) women who were, interestingly, all right-handed (left-handedness throws off some neurological studies). He also secured, more easily, 11 native English-speaking collegians.

Dr. McCarthy with students Will Walker '08, Rachel Feyre '10 and Ashley Williams '09. The group were presenting their research at the 20th Annual Convention of the Association for Psychological Science in Chicago in 2008.

McCarthy and a group of students tested the hypothesis of a more deliberative cognitive style in German students. This was measured on both a test of the time when subjects indicated that they had comprehended the meaning of a sentence and also on neurophysiological activity using an EEG (electroencephalograph). Experiments were conducted whereby the same sentences, in English and German, were shown to the respective subject group. Each was instructed to click a computer mouse when they had comprehended the full meaning of the sentence. (Dr. McCarthy credits Maij Dubois and the Dubois Research Fund for their financial support for students to assist in the research, attend conferences, and receive financial support for summer work.)

EEG activity was measured to determine if there were different timings of brain activities in German and English speaking people that would underlie their behavioral responses. When the first attempts to use EEG equipment at Yale University failed, Fairfield eased the research along and purchased for Dr. McCarthy’s lab a 64-channel EEG. Dr. McCarthy and his students attach each subject to the EEG via a device that looks like a swim cap but has electrodes attached to it.

“We have to pay the subjects because, for one thing, we put goop all over their hair,” Dr. McCarthy confessed with a laugh.

The result: “English-speaking subjects were significantly faster in their response time. As indicated by the results, native English-speaking Americans differed from native German-speaking Germans in both comprehension reaction time and EEG measured response.”

The EEG data analyzed activity in the frontal region of the brain and focused on 40-Hz activity. Such activity, which is used in the study of sensory perception, provided a measure of timing of comprehension. The 40 Hz wavelet patterns clearly indicated a difference in cognition time between the two groups. These results are visual proof of the clear difference in cognition times between the English and the German subjects.

“Consistent with our hypothesis, native German-speakers took significantly more time to indicate when they understood a sentence than did native English speakers. The result is consistent with the ideas of Vygotsky and the theory that individuals from different cultures develop unique language-processing strategies that affect behavior.”

At the present time the research group is waiting for repairs to the equipment in order to start looking at differential performance between German and English speaking in their response to ambiguous stimuli. This study will include a task developed by students (Ashley Williams ’09, Kelsey Schroeder ’10, Rachel Feyre ’10, Ashley Fresenius ’11, Mairead McConnell ’12) to assess response to abstract and representational art. “Both groups will be shown representational and abstract art and asked for preferred judgments,” Dr. McCarthy said. “Based on student work, it is predicted that Germans will respond more favorably to the less ambiguous representational art.”

The experiments acquired an added “real world” significance when Dr. McCarthy began discussions with a colleague at the Charles F. Dolan School of Business, Dr. Carl Scheraga, who teaches international business. Through his work Dr. Scheraga was aware that managerial style is rooted in culture. A parallel area of work began. Both researchers wondered if managerial style differences that are rooted in culture and internalized through language could account for the differences expressed in the different managerial styles found in different countries.

The work with Dr. Scheraga led to a 2007 presentation in Budapest, Hungary at the 20th Annual Conference of the International Association for Conflict Management. Their paper hypothesized that differences in culture internalized in language would produce different patterns of brain activity that would be reflected in managerial style.

The following year Drs. McCarthy and Scheraga along with Dr. Donald Gibson, chairman of the Department of Management in the School of Business, expanded on the notions in a paper presented in Chicago at the 21st Annual Conference of the International Association for Conflict Management. The publication of an extended abstract from this conference in the eJournal Neuroeconomics resulted in a high number of hits on the website in which the abstract was published. “It was reported that not only were we in the top ten, but we were in the fourth position in overall hits. Following the publication of this abstract, the publishers of an edited book asked us to submit a chapter.”

The upcoming book entitled, Neuroeconomics and the Firm published by Edward Elgar Publishers contains a chapter on Dr. McCarthy’s research. The book takes into account the realization that neurophysiological functioning underlies the psychological variables that play a part economic decisions.

Dr. McCarthy admits that they have only begun to scratch the surface.

“Obviously we have more to study in the effects of German culture on language and thinking, to say nothing of how other languages, rooted in their respective cultures, influence thinking, behavior, and neurophysiological functioning. I am not a linguist, and I am not an EEG expert. I am learning as I go,” he said.

“The implications for the business world are substantial,” said Dr. McCarthy. “Among other things, you can no longer take a crash course in culture and expect negotiations to automatically go smoothly. That just doesn’t work.”

The book addresses a  developing new area in the field of economics. At one time economists believed that all decisions were rational, but a number of years ago, the realization that psychological variables played a part in all decisions lead to a branch of economic called behavioral economics. Addressing the realization that differences in neurophysiological functioning underlie decisions has led to the cutting-edge research that is contained in the book’s title.

He sees the chapter that he and his collaborators have authored in Neuroeconomics and the Firm as a “big breakthrough” because of the international recognition it has generated. “Why is this working?” he asked. “Because what we are doing is related to what Fairfield University believes in.”

Since the initial series of experiments, Dr. McCarthy, colleagues, and students have expanded the scope of their inquiry. Since 1999, their efforts have lead to 20 talks and presentations at national and international conferences along with a chapter in a major book.

“Through our research we are hoping to increase cross-cultural understanding and in doing so we are actively engaged in working with students in a manner that adds to their undergraduate research experience while preparing them for graduate study. A number of students who have worked in this area have gone on to positions in other research labs prior to attending graduate school. Not only does the work involve the psychology department, it is interdisciplinary and even inter-college.”