The psychiatric drug age may have reached its peak. Although mind-altering medications are being prescribed in record numbers, signs of a radically new approach to understanding and treating mental illness are emerging from the deep waters of neuroscience. No longer focused on developing pills, a huge research effort is now devoted to altering the function of specific neural circuits by physical intervention in the brain.

The starkest indication that drugs are increasingly being thought of as yesterday's cutting-edge comes from the little mentioned fact that almost all the major drug companies have closed or curtailed their drug discovery programmes for mental and neurological disorders. The realisation that there has been little in the way of genuine innovation since the major classes of psychiatric drugs were discovered in the 1950s has made future sales look bleak. New drugs have regularly appeared since then, often with fewer side effects, but most are little better in terms of effectiveness.

This is largely because these drugs tend not to be very specific in their effects on the brain. For example, the medication fluoxetine (better known as Prozac) alters levels of the neurotransmitter serotonin in brain networks related to mood, but it has the same effect in brain networks involved in sexual response, leading to the common side effect of difficulty with orgasm. The pharmaceutical holy grail has been to develop drugs that are more selective in their effects, but this multibillion dollar dream has largely been ditched by Big Pharma as too difficult.

In its place is a science focused on understanding the brain as a series of networks, each of which supports a different aspect of our experience and behaviour. By this analysis, the brain is a bit like a city: you can't make sense of the bigger picture without knowing how everything interacts. Relatively few residents of Belfast who live in the Shankill spend their money in the Falls Road and this tells us much more about the city – as these are the key loyalist and republican areas – than knowing that the average income of each area is much the same. Similarly, knowing that key brain areas interact differently when someone gets depressed tells us something important that a measure of average brain activity would miss.

The idea is that we can better understand complex human emotion and behaviour by understanding neural networks. This is where a new wave of interest is beginning to rise within neuroscience. The surge of interest is not with the concepts, which, if truth be told, became common currency in the mid-20th century, but in the extent to which research and treatment are being driven by a desire to identify and modify key brain circuits.

Big money has already been committed. The Obama White House has promised $3bn to develop technology to help identify brain circuits, while the National Institute of Mental Health has promised to move its seven-figure funding away from research into conditions such as schizophrenia and depression towards a system that looks at how brain networks contribute to difficulties that are shared across diagnoses. This project, given the unspectacular name Research Domain Criteria or the RDoC Project, is being cited as an eventual replacement for the diagnostic system used by current-day psychiatrists.

Perhaps more surprising for some is the explosion in deep brain stimulation procedures, where electrodes are implanted in the brains of patients to alter electronically the activity in specific neural circuits. Medtronic, just one of the manufacturers of these devices, claims that its stimulators have been used in more than 100,000 patients. Most of these involve well-tested and validated treatments for Parkinson's disease, but increasingly they are being trialled for a wider range of problems. Recent studies have examined direct brain stimulation for treating pain, epilepsy, eating disorders, addiction, controlling aggression, enhancing memory and for intervening in a range of other behavioural problems.

New technologies such as optogenetics suggest that even finer control of brain circuits may be possible. While deep brain stimulation involves stimulating the brain with electrical currents, optogenetics involves injecting neurons with a benign virus that contains the genetic information for light-sensitive proteins. The brain cells then become light sensitive themselves and their activity can be controlled with millisecond flashes of light sent through embedded fibre optic cables. Until now, this has only been demonstrated in animals but there are high hopes that it could lead to precisely controlled treatments in humans that intervene only in carefully selected brain circuits.

Let's make this clear. The scientific revolution in identifying and manipulating brain circuits is already under way. Additionally, with billions committed to research over the next 10 years, the medical revolution is likely to follow in the decades after. But a more important change will occur. Advances in neuroscience are not just discoveries, they also shape, as they always have done, how we view ourselves. As the Prozac nation fades, the empire of the circuit-based human will rise, probably to the point where dinner party chatter will include the misplaced jargon of systems neuroscience. But these are tools to help us understand humanity, not our humanity itself. Grief remains the loss of a loved one, joy a fulfilment of life's desires, and neither could be explained just by neural circuits. Life will still stretch beyond the confines of our inner worlds.