Yesterday, Chris had an interesting post describing an experimental situation in which selective brain damage leads to improved performance. It's an cool paradigm, since it helps to illuminate the innate constraints of the (intact) brain.
Look, for example, at this experiment, led by Baba Shiv, Antonio Damasio and George Loewenstein. The scientists invented a simple investing game. In each round, experimental subjects had to decide between two options: invest $1 or invest nothing. If the participant decided not to invest, he or she would keep the dollar, and the task would advance to the next round. If the participant decided to invest, he or she would hand over a dollar bill to the experimenter. The experimenter would then toss a coin in plain view. If the outcome of the toss were heads, then the participant would lose the $1 that was invested; if the outcome of the toss were tails, then $2.50 would be added to the participant's account. The game stopped after 20 rounds.
If people were perfectly rational (as economists assume), then the subjects should always choose to invest, since the expected value on each round is higher if one invests ($1.25, or $2.50 x 50 percent) than if one does not ($1). In fact, if one invests on each and every round, there is only a 13 percent chance of obtaining lower total earnings than if one does not invest and simply pockets the $20.
What did people do? They behaved irrationally, and choose to invest less than 60 percent of the time. Because we are wired to fear risk (and always try to minimize our fear), most subjects were perfectly content to sacrifice profit for security. Furthermore, their willingness to gamble plummeted immediately after losing a gamble, as they remembered just how painful losses can be.
So far, so obvious: people hate losses, and are naturally irrational when it comes to evaluating risky gambles. But Damasio and Loewenstein didn't stop there. They also played the investing game with neurological patients who had suffered brain damage that silenced their experience of emotion. If the fear of losing money was causing irrational investing decisions, then these fearless patients should perform better than their healthy peers. Their impaired brains should be willing to engage in more risk which, at least in this case, is an advantageous strategy.
That's exactly what happened. Patients incapable of feeling emotions chose to invest 83.7 percent of the time, and gained significantly more money than normal subjects. They also proved much more resistant to the sting of losses, and chose to gamble 85.2 percent of the time after they lost a coin toss. In other words, losing money made them more likely to invest, as they realized that investing was the best way to recoup their losses. It is an irony of economic theory that it only excels at predicting the behavior of patients with serious brain injuries.
Of course, this is an isolated experiment. Suffering from this type of brain damage - and losing the ability to experience emotions - has tragic consequences. You might become a slightly more rational investor, but you also lose the ability to make ordinary decisions in daily life.
- Log in to post comments
Real, kim kardashian sex tape, [url= http://kimkardashiansextape.webstarts.com/ ]kim kardashian sex tape[/url], >:-),
The thing that is often neglected in these kinds of experiments is an evolutionary analaysis of why such a strong risk adverseness is wired into people.
My personal educated guess ( ;) ) is that it is because of non-linear utility. In a strictly numeric sense, $2.50 dollars is $1.50 better than $1.00 dollar and $0.00 is $1.00 worse.
But in a utilitarian sense, $1.00 worth of food may be 'just enough', $2.50 worth of food more than I need or can store for future use, and $0.00 worth of food fatally too little.
Winning an extra $1.50 is nice - but not worth adding a significant risk of complete catastrophe. People who gamble on survival resources don't survive on the long term. Because sooner or later you always throw 'snake eyes'.
A prediction of such a cause would suggest that when people's risk is felt to be far away from 'lose everything', they will be more willing to take a gamble on 'more' (with a chance of 'less') at the expense of a certain 'enough'.
IOW: If the test started with $10.00 in the subjects pocket rather than $1.00, they will be more willing to risk $1.00 on the chance of gettting $2.50 back.
Are the brain-injured patients reacting more rationally or are they just more likely to gamble (due, presumably, to disinhibition of some kind)? I mean, if the odds are rejiggered a bit to make them unfavorable (in a way that's not entirely obvious), do the brain-injured patients still invest just as eagerly?
Gambling...
This task, in my opinion, is too basic to probe an actual gambling process. I've read in published work that there is another gambling task used to establish decision making Deficits in people with brain damage in parts of the PFC. The gambling tasks is called the Iowa Gambling Task (IGT).
As of what i've read in journals, researchers found that PFC damaged individuals fared worse compared to persons with no brain damage. As in, the PFC damaged individuals failed to make a change to gambling suits (IGT comprises of a few gambling suits, ones that are beneficial and ones that are non-beneficial) that benefited them.
I believe that one of the papers on IGT tested on PFC damaged patients (lesions) made a conclusion that PFC damage made them more impulsive. This would explain why in this present research, the persons with brain damage were more likely to invest - because their impulsivity just reminded them of the immediate reward of 2.50 - while the normal persons were less inhibited to the fear of loss.
This reminds me of reports some years back that many elderly people (and a surprising number in middle age) also can't perceive a bad risk situation and will go on losing. I think they were studies done with rigged decks of cards.
It explains a bit about why business predators focus on the elderly, and why there's so much opposition to any attempt at protective legislation and blame laid on people who don't make the "rational" choices the same way young people do.
Evolutionarily? Grandparents lagged behind when their children were up and already running from the sabertooth, perhaps. Sacrifices must be made.
Kindly help me in solvin the matchstick puzzle.
How could you solve v - ix = iii after changing one matchstick position.The answer should not be v - ix is not equal to " iii.
Kindly help.
Oh, you're silly. It feels as if you knocked down a straw man.
From what I got from an economics class, we assume people act if they believe that it is in their self-interest to do so. Does that imply that people maximize their self-interest monetarily? Not necessarily. Some people value other things more than money.
Taken from wikipedia...
"For most people, "rationality" means "sane," "in a thoughtful clear-headed manner," or knowing and doing what's healthy in the long term. Rational choice theory uses a specific and narrower definition of "rationality" simply to mean that an individual acts as if balancing costs against benefits to arrive at action that maximizes personal advantage."
And this is were we goofed up here.
If we were to try to balance costs with benefits, it all depends on that coin that gets flipped. Yes, that same wiki page says that critics say that the rationality assumption assumes perfect information. However, my professor was specific to say that we act if we THINK the benefit is greater than the cost.
Do your test subjects think the benefit is greater than the cost?
The cost? It costs time, a little bit of nerve, and a 50% chance of losing a dollar.
The benefit? A 50% chance to get a dollar fifty. I would think this can explain the less-than-60% figure given on this blog post.
See? The costs and benefit is more equal if we put it this way.
Money is not the only thing an economist would factor in, and that's pretty much the flaw to this argument: assuming economists only think about monetary costs and benefits. Otherwise, we'd be stuck trying to explain why enough people are getting degrees into "easy" majors that don't pay so awesomely when they could have invested their time for a better major.