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July 7, 2008
The conscientious economist

By Carol Clark

Monica Capra, assistant professor of economics, decided on her career when she was about 13 years old and hyperinflation rocked her homeland of Bolivia.

Hunger was not a problem for Capra. Her family lived in the capital La Paz, where her mother was a historian and her father was an engineer who held various political appointments over the years, including ambassador to Mexico.

“I didn’t personally suffer, but I could see the effects,” Capra says of the inflation, which rose to a phenomenal rate of 25,000 percent by 1985.

Money had virtually no value. Capra’s mother began bartering for goods, exchanging sugar for flour or other staples. The supply of milk dried up, since farmers could not afford to produce it. “The government controlled the prices and did not allow importing,” Capra recalls.

Meanwhile, drought struck the highlands of the country. Thousands of destitute people poured into the streets of La Paz, begging for food.

Realizing that poor fiscal policies had caused the hyperinflation, Capra decided that when she grew up she would become an economist — a good one, who considers the impact of policies on people.

“The human suffering that bad economists generate can be as bad as the suffering caused by those who explicitly try to hurt people,” she says.

Her upbringing was steeped in politics and policy. After one coup d’etat, her father had to go into hiding due to his political views, and the whole family lived in exile in Mexico for several years.

Her worldview was further shaped by two years of high school at Pearson College of the Pacific in Canada, part of the prestigious United World Colleges program. These unique schools bring together high school students from around the world to study a rigorous curriculum designed to foster peace and international understanding.

Capra earned a PhD in economics at the University of Virginia before joining Emory, where her research focuses on experimental and behavioral economics. She studies questions such as: Can freedom of the press help get an economy out of a poverty trap? How do moods and emotions affect social interactions? Why are adolescents more prone to taking risks than adults? Can trust be measured and, if so, what’s the best method to do so?

“In the real world, it can be difficult to establish causality,” Capra says. “The advantage that experimental economists have over natural economists is control. We can generate an experimental economy, setting the control parameters of the theoretical model, and then let people behave as they want.”

In essence, she explores how people make decisions, along with the outcomes of those decisions.
“When you observe the choices that people make by themselves, there are a lot of biases,” Capra says. Even if individuals are given new, relevant information that conflicts a prior belief, they often will not update their beliefs, she notes. “But if you put them in a group situation, where there is a market interaction and public information, they tend to behave more rationally.”

In recent years, Capra has become a pioneer in the emerging field of neuroeconomics. She has published a series of important papers in collaboration with Emory colleagues Gregory Berns, professor of psychiatry and behavioral sciences; Charles Noussair, professor of economics; and other researchers. By combining functional magnetic resonance imaging (fMRI) with established economic models, they are probing decision-making at both the behavioral and neural levels.

One of their recent experiments looked at how people make decisions in terms of risk and pain, using varying degrees of electrical shocks on volunteer participants. The results suggested that some people are “extreme dreaders,” who will opt to receive a bigger shock that is administered sooner, rather than wait longer for what would probably be a lesser shock.

“We now have the tools to better understand our brains in relation to decision-making and other behaviors, and that’s a fascinating thing,” Capra says. “No one knows exactly where this is going, but I believe it’s going to change not only the discipline of economics, but all disciplines.”