Prices as memories
Memory as meaning-making
Why does your brain exist? Popular answers might be that a brain is for thinking or using tools or even for managing social interactions. But there’s growing evidence that your brain simply exists to help you survive. In particular, the brain exists to help regulate motor behavior. This means coordinating the parts of the body—limbs, muscles, tendons, neurons, etc.—to achieve goal states, such as opening or closing a hand.
Motor behavior is surprisingly complex. From a first-person conscious perspective, it seems very easy: a healthy person can accomplish ordinary motor tasks without apparent thought or effort. But the scientific reality is that motor behavior is very hard to achieve. Part of this is because motor behavior is not given; there is not a set of commands in the brain available for it to execute; there is no set of buttons it can press or levers it can pull to achieve outcomes. Walking, for example, cannot be achieved by the activation of some inborn, genetically built walking program in the brain. No such program exists. Instead, walking requires the complex coordination of many parts: muscles, joints, neurons, the heart, the lungs, etc. As a result, there is a tremendous variety of behaviors that get called walking that are all different from each other in subtle and important ways. This allows for a tremendous and necessary degree of flexibility. You couldn’t have possibly evolved a program for walking up a flight of stairs, but your brain doesn’t need a program like that to achieve desired motor outcomes. Ultimately, the brain’s job is to manipulate the system so that the goal state of reaching the destination point B from the starting point A is achieved in an efficient manner, which often means producing an instance of a class of states that humans categorize as “walking”.
Not only is it very challenging to coordinate the body to achieve the intended motor behavior, but figuring out what the intended motor behavior should be is also very complex. For example, if a tiger attacks you, what should you do? An old theory of the brain, which is still quite popular, posits that a situation like this is largely determined by some kind of innate module or circuit which reacts in a largely obligatory manner toward the threat. Maybe when a tiger attacks, this triggers a fear circuit that forces you to flee.
The problem with this idea is that there are very few if any survival situations where obligatory, preprogrammed responses are useful. It seems logical to say that when you see a predator, you should run. But just like the “walking” category hides an immense amount of important variability in motor behavior, the “predator attack” category also neglects important detail. When you see a tiger, there are a lot of important things to consider. Has the tiger seen you? Is it an adult tiger or a juvenile? How far away is the tiger? Are you above the tiger, level with it, or below it? Is the terrain muddy or firm? Are there places to hide or weapons you can pick up? Is it night or day? Are you healthy or lame? Have you eaten recently? Are you hydrated? Are other people with you? And so on. The more you include these highly relevant details in the analysis, the less it becomes obvious that there should just be some instincitve, preprogrammed response that you deploy in all circumstances. It seems much more likely that in every situation, the brain has to figure out what to do, and it does not have a lot of time to think about it.
In order to make an accurate decision, the brain has to incorporate a vast amount of data that comes from three distinct subsystems. Some data comes from the brain, like chemical transfers and action potentials. Some information comes from the body, like data about the beating of the heart and the stretch of the lungs as oxygen comes in. But a great deal of crucial information comes from the environment, such as data about the tiger itself. Without this information, the brain is going to have a hard time figuring out how to keep the body alive, which is its job.
The problem is that you brain is trapped in a dark, silent box known as your skull. It does not have any innate access to the external world. Instead, that information has to come in through various sensory modalities: sight, sound, touch, etc. Perhaps surprisingly, the sense organs don’t tell the brain what’s happening around it. The eyes don’t transmit pictures to the brain; the ears don’t record sounds for the brain to replay. Instead, the sense organs merely send electrical signals to the brain, signals that have no obvious relationship with any particular image, sound, or texture. Nor does the brain simply “decode” these signals, as there is no one-to-one relationship between the signals and any particular sensory experience. Instead, the brain has to solve the “inverse problem”, the problem of taking the internal effects of an external cause and trying to figure out what the external cause probably was. That is to say, because the meaning of the signals is in no way given, the brain must make meaning out of them.
To do this, the brain acts like a scientist, using a model (an internal model) to determine the most likely explanation for what’s happening based on the data—to explain what the data “means”. And like a scientist, the brain does not have the luxury of simply testing every possibility until everything but the truth has been ruled out. Instead, both scientists and the brain rely on memory: they compare the current situation to situations previously experienced that were similar to it. The more similar a previous situation is, the more likely the solution that worked for that situation also works to address the current situation.
Regarding a tiger attack, for instance, the brain will address the situation by combining and condensing data from the brain, body, and environment into a multimodal summary, which it uses to get a handle on what is happening. The brain compares the summary to previous experiences where it made similar summaries in similar situations and generalizes from those past situations to make a decision in the present.
Importantly, any given multimodal summary does not have an inherent meaning, just like the signals that are compressed into the summary do not have inherent meanings either. As a result, meaning has to be made. The brain makes meaning not for abstract intellectual purpose but to survive and thrive in a harsh environment, or somewhat more precisely, to regulate and coordinate the body so as to achieve metabolic efficiency, or the efficient management of the intake and expenditure of vital resources, i.e., allostasis.
The summary can be reasonably called memory because it is a causal result of the past, but it is more useful than a classical understanding of memory might seem to be because the multimodal summary says nothing about the past and so is not limited to it. As a result, the multimodal summary can be understood based on the present situation and anticipated needs.
A multimodal summary is kind of like zipping files, but it’s more flexible than that. It’s a one-way zip where you can’t unzip it back into the original files that were condensed into it. Instead, it’s a special zip that lets you decide which files are most useful to you for the present situation and construct those files in the moment based on available resources. Those “files” would be things like motor behaviors and psychological experiences, and the constraints would be things like your heart rate and your oxygen intake.
An economic example of a multimodal summary is profit. Profit is multimodal because it is the result of many different kinds of events, and it summarizes the effects those complex and seemingly disparate events into a single easily understood number that the CEO can use to make decisions.
But a given instance of profit doesn’t have any inherent meaning for the business. A given profit could be consistent with an immense number of wildly different situations. If a business makes a million dollars in profit, for example, this could be because the product is great, or because the competition is terrible, or because of a temporary fad, or because of a great marketing team, or because of innovations in the production process, or an unexpected decrease in the cost of an input, etc. But once the CEO knows how profitable the company is, they can combine that summary with information about the context to bring up historical situations that seem relevant and so make accurate decisions to guide the business.
In the brain, the process is not so separate and discrete. Profit is relatively objective; the accounting of revenues and costs should be the same regardless of the meaning being made out of it. But the multimodal summary is constructed out of the same processes that give meaning to it.
It’s also important to know that memories are selected as well as constructed. For any stream of incoming data, the brain has many multimodal summaries it can possibly construct, and for any multimodal summaries, there are many meanings the brain can make out of it. The potential summaries and meanings compete with each other, and the winner is implemented as the actual summary and the actual meaning. This allows the brain to have many options and to weigh them against each other as the situation evolves, allowing for behavior that is highly tuned to the specific details of the problem. Quite often, the real challenge of achieving allostasis is selecting the right meaning rather than constructing it. It’s like doing science: stating any arbitrary hypothesis might not be very hard, but selecting the one that’s true is very difficult.
Prices as memories
As we would expect of memories, prices are caused by the past, as depicted below.
However, prices cannot be used to deduce anything about the past; there is no arrow pointing in the other direction. Since prices have no given meaning, nothing that they inherently say or tell us, we are free to make meaning of them based on whatever is most useful for us.
Suppose an apple costs $1. What does $1 mean? On its own, the answer is nothing. Meaning emerges when we consider $1 in relation with other prices. For example, if apples cost $1 and oranges cost $2, then the price of an apple now means something. The fact that apples cost $1 tells you that every time you buy an apple, you are giving up the option to buy half an orange. Similarly, if plums cost $0.50, then buying an apple means giving up the option to buy two plums. It’s not just fruit: if a chair costs $20, then spending $1 on an apple means giving up one-twentieth of a chair.
We’ve gone from having no meaning to assign to $1 to now having two meanings: $1 means half an orange, and it means two plums. Which meaning is correct?
The answer to that question is determined by what you want to do. Meaning is made to prepare action which is undertaken for the sake of achieving allostasis. The “full” or “potential” meaning of $1 is the set of all possible comparisons between $1 and other prices. The meaning constructed by the person using the price to make a decision is the subset of comparisons that are relevant to their decision. The fact that spending $1 on an apple means giving up one-twentieth of a chair is part of the meaning of $1 if and only if this comparison is relevant to the decision you’re making. In real life, the meaning you make of a price will also include interoceptive signals about your metabolic state and exteroceptive information about, e.g., the apparent visual quality of the apple, but if we’re considering “just economics”, then we can think of all possible meanings that can be made of a price as being all subsets of comparisons between that price and all other prices.
This means that the meaning of a price is relational. You can’t look at the price itself to see the meaning. Instead, you have to look at how the price relates to other prices to make meaning of it. Plausibly, all physical signals have relational meaning only. The electrical signals sent from your eyes to your brain don’t mean anything in and of themselves in the same way that the string of symbols that spells “hello” doesn’t inherently mean a greeting. Instead, the signals correlate with other things such that the brain starts to build useful patterns, and decides how to construct a visual image based on how it relates the electrical signals from the eyes to other signals. Whenever the brain makes meaning out of something, it does so by relating what’s happening to everything else that’s happening and deciding what it means in that context.
Intuitively, it’s unsurprising that the meaning of a price is relational because the key factor in determining the optimality of a purchase is the opportunity cost. When you buy an apple, the key question is, “Was this worth giving up whatever you would have bought instead?” That “whatever” is half an orange, or two plums, or one-twentieth of an office chair, etc. What a price means, then, is simply what it means to you in terms of how you use it to make comparisons among your options to determine the optimal action for achieving allostasis.
Source/Further reading: Constructionist Approaches to Emotion in Psychology and Related Fields
> That is to say, because the meaning of the signals is in no way given, the brain must make meaning out of them.
*By a correspondence theory of meaning.