A recent Stanford survey has used fMRI scans to show that executing a profitable stock trade triggers the same pleasure centers in the brain that respond to sex and drugs like cocaine. The findings have prompted all sorts of salacious headlines in the business press, but the real insight has nothing to do with sex or drugs. The study adds to the growing body of evidence that people rarely make decisions in the cold, calculating fashion suggested by neoclassical economics — even when the decision at hand is as subject to quantitative analysis as a stock trade.

These study results highlight how deeply embedded the decision making process is within our human cognitive and emotional systems. Some see a Brave New Future in applying insights gained from neurobiology to improving our decision making abilities.

One day, brain science may help money managers spot shifts in investor sentiment, said David Darst, chief investment strategist for the individual investor group at Morgan Stanley. Armed with brain scans, psychotherapists may be able to hone traders’ natural impulses of fear and greed.

Neuroscientists may even develop psychoactive drugs, or neuroceuticals, that make people better, more-profitable traders, Knutson and other psychologists say. Look at Prozac. In the space of a few years, Prozac and other drugs have not only revolutionized the treatment of depression but also profoundly changed the way we view the mind.

People recognize that chemistry drives their brains, moods and behavior - and that chemistry can change them.

Similar drugs, ones that improve a trader’s decision making by 20 percent to 30 percent, may be just a few years away, said Zack Lynch, managing director of NeuroInsights, a consulting firm based in San Francisco that tracks the $100 billion neurotechnology industry. If these neuroceuticals work, they could rock Wall Street.

“The whole investment community will be scrambling to get these things,” Lynch said.

I’ve long thought that the use of performance enhancing drugs, typically associated with professional sports, would spread to other endeavors as science progresses. Arguably, many professionals already use chemicals to improve their performance. Constant nicotione and caffeine consumption has been endemic in the business world for a long time, and more recently prescription drugs such as Adderall have been used and abused by white collar professionals to improve focus and concentration. Chemical-assisted performance is by no means a panacea. It carries with it a host of medical and ethical questions. Yet as we gain deeper insight into the way the human brain works, we’ll inevitable be confronted with new opportunities and dilemmas such as these.

Read more: Sex, Drugs, Money: The Pleasure Principle

For an account of Adderall’s effects, see The Adderall Me: My romance with ADHD meds

Update (2/10/06): NeuroInsights managing director Zack Lynch has posted a clarification of his position on neuroceuticals and trading to his excellent blog Brain Waves.

Previously: New Drug Curbs Compulsive Gambling