For two years in a row, Arno Riedl, Professor of Public Economics at Maastricht University School of Business and Economics made the list of Top 40 economists published by the Dutch professional journal Economisch Statistische Berichten (ESB). A portrait of a prolific and passionate interdisciplinary scientist.
Arno Riedl, Professor of Public Economics at Maastricht University School of Business and Economics, says he always encourages his PhD students in experimental economics to listen to what economic theory has to tell us. “We should not do experiments only because it is fun but because we want to understand people’s behaviour. This means that we can and need to be inspired by theoretical models.”
An economist by training from the University of Vienna, Riedl came to the Netherlands in 1998 as a post doc researcher at the Center for Research in Experimental Economics and Political Decision Making (CREED), a research institute at the Faculty of Economics and Econometrics at the University of Amsterdam. CREED was one of the first centres in experimental economics in Europe and the first one in the Netherlands.
“I was employed for doing research commissioned by the Dutch Ministry of Social Affairs and Employment and involved in one of the first experimental studies that required to implement a whole economy, in that case the Dutch economy, in the laboratory,” says Riedl.
Joining Maastricht University was a well considered decision for the Austrian researcher. “There was a strong basis to build upon,” he explains. “Although the facilities necessary for experimental research were not in place then, the department of economics had and has a strong theory group and a high reputation, ranking among the top 10 in microeconomics and game theory in the world.” “I was attracted by that fact because game theory is an important component of experimental economics,” he says.
According to Riedl the strength of experimental economics, compared to experimental work in psychology for example, lies in the fact that economists have well understood the general formal framework which allows to test and falsify theories.
Riedl’s arrival in Maastricht coincided with the emergence of the combination of economics and neuroscience in what is now known as neuroeconomics. “During my introductory meeting with the former president of Maastricht University Jo Ritzen,” he remembers laughing, “one of the first questions he asked me was: ‘Do you also do this neuroscience stuff?’”
“Neuroeconomics is about using economic methods and models to understand the brain and using knowledge of the brain to better understand economic decisions,” he explains, quickly adding with a provocative smile: “Not all economists think it’s useful by the way but that’s a different debate.”
Following Ritzen’s advice, Riedl got in touch with Professor Rainer Goebel at the neuroscience department and felt encouraged to see that they both had the same approach to science in general. Their collaboration was sparked when they decided to submit an interfaculty proposal, together with dr. Martin Strobel, to win an important pilot grant for a research project on Brain & Cognition, offered by The Netherlands Organisation for Scientific Research (NWO).
Interdisciplinary research: Neuroeconomics
After this first success, their next move was to further promote and obtain funding for the study of neuroeconomics. Their continued efforts eventually led to the creation of an interfaculty post doctoral position, integrating economics, neuroscience and psychology. Later, they were also able to hire PhD students.
“One of our PhD students, Eva Wölbert, will defend her thesis in May this year,” Riedl says, adding proudly that she has already received two prestigious job offers.
Wölbert’s research focuses on the concept of utility, a theoretical construct to help scientists understand how people make choices. “By doing experiments with our high tech fMRI scanners, we are trying to understand if there is indeed a ‘utility machine’ in the brain which constructs the value of objects. This is important to understand decision-making processes,” Riedl explains.
This research is relevant for neuroeconomics because it is trying to determine whether the valuation of a priced good such as a snack is encoded in the same part of the brain as a non-priced good such as a walk with a close friend or a nap, which cannot be rated on the market.
“The surprising result is that it seems indeed to be the case that the pleasure we experience for both very different types of goods is encoded in the same part of the brain,” says Riedl. “This is what makes the research particularly interesting as it provides a neuroscientific basis for assumptions made in theoretical models in economics.”
One of the challenges however in doing this type of interdisciplinary research, Riedl has noticed, is that neuroscientists and economists operate on very different fields of expertise and do not speak the same language. “An economist uses the same terms as a neuroscientist for completely different things and it takes time to understand each other,” he says.
This observation led him and colleagues in the departments of neuroscience and psychology to join forces to create an interdisciplinary education programme with the aim of educating a new generation of researchers who would learn to integrate various fields of knowledge from the start.
“This way, even when they later specialize in their field of interest, these researchers will still know and understand what their colleagues from other fields are talking about, what type of statistics they need and what type of methodology they use,” Riedl argues. “This knowledge will give them a jump start because they can start immediately with their research instead of having to spend time translating the different approaches.”
In September 2012, Maastricht University launched two interdisciplinary research masters, a one-year master in Human Decision Science combining economics and psychology and a two-year research master specialization in Neuroeconomics within the already existing research master Cognitive and Clinical Neuroscience. “This is worldwide the first truly interdisciplinary research master including a specialization in neuroeconomics,” Riedl emphasizes.
Riedl believes in the success of the neuroeconomics, which he describes as “one of the future niches in Europe and US.”
The value of fundamental research
As of September 2013, Riedl will become the head of the department of the unit AE1 of the General Economics department for the second time. He speaks of AE1 in positive terms. “We have an incentive system which rewards high quality research and promotes the development of innovation in education,” he says. “What I especially admire is that there is a very good understanding between economics theorists at AE1 and Quantitative Economics department and experimental and behavioural economists, which is something we do not find everywhere. We not only talk to each other but I would say we inspire each other. We also organize joint seminars.”
One of the achievements Riedl is proud of is the research lab he contributed to create back in 2007. “Without the lab, you could forget about doing experimental research,” he says.
He is concerned however about the increasing scarcity of financial resources allocated to fundamental research. “We have a relatively large pool of students whom we can use as subjects to do primary data acquisition for our research but we need to incentivize them to participate with real money. We try to calibrate the payment so that on average they earn a bit more in the lab than at other student jobs.”
In Riedl’s view, decision-makers responsible for higher education underestimate the importance of fundamental research. “Without fundamental research, we cannot do applied research,” he stresses, adding that in this respect the situation is becoming particularly worrisome in the Netherlands.
“In Germany, the budget devoted to fundamental research is actually increasing while it is decreasing in the Netherlands,” Riedl points out.
As a result, Riedl explains that he and the researchers under his supervision are increasingly spending time writing research proposals in the hope to obtain funding instead of doing actual research. “Since everybody is doing this, the competition is getting stronger and the chance of getting funding becomes smaller, all the more since there is also less money available for fundamental research. This is not sustainable in the long run,” he warns.
By Sueli Brodin