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[Kesson Magid <kanadadry AT yahoo.co.uk>]

http://www.economist.com/science/displayStory.cfm?story_id=4102350

Jun 23rd 2005 
>From The Economist print edition

Monkeys show the same “irrational” aversion to risks
as humans

ECONOMISTS often like to speak of Homo
economicus—rational economic man. In practice, human
economic behaviour is not quite as rational as the
relentless logic of theoretical economics suggests it
ought to be. When buying things in a straight exchange
of money for goods, people often respond to changes in
price in exactly the way that theoretical economics
predicts. But when faced with an exchange whose
outcome is predictable only on average, most people
prefer to avoid the risk of making a loss than to take
the chance of making a gain in circumstances when the
average expected outcome of the two actions would be
the same. 

There has been a lot of discussion about this
discrepancy in the economic literature—in particular,
about whether it is the product of cultural experience
or is a reflection of a deeper biological phenomenon.
So Keith Chen, of the Yale School of Management, and
his colleagues decided to investigate its evolutionary
past. They reasoned that if they could find similar
behaviour in another species of primate (none of which
has yet invented a cash economy) this would suggest
that loss-aversion evolved in a common ancestor. They
chose the capuchin monkey, Cebus apella, a South
American species often used for behavioural
experiments.


First, the researchers had to introduce their monkeys
to the idea of a cash economy. They did this by giving
them small metal discs while showing them food. The
monkeys quickly learned that humans valued these
inedible discs so much that they were willing to trade
them for scrumptious pieces of apple, grapes and
jelly.

Preliminary experiments established the amount of
apple that was valued as much as either a grape or a
cube of jelly, and set the price accordingly, at one
disc per food item. The monkeys were then given 12
discs and allowed to trade them one at a time for
whichever foodstuff they preferred. 

Once the price had been established, though, it was
changed. The size of the apple portions was doubled,
effectively halving the price of apple. At the same
time, the number of discs a monkey was given to spend
fell from 12 to nine. The result was that apple
consumption went up in exactly the way that price
theory (as applied to humans) would predict. Indeed,
averaged over the course of ten sessions it was within
1% of the theory's prediction. One up to Cebus
economicus.

The experimenters then began to test their animals'
risk aversion. They did this by offering them three
different trading regimes in succession. Each required
choosing between the wares of two experimental
“salesmen”. In the first regime one salesman offered
one piece of apple for a disc, while the other offered
two. However, half the time the second salesman only
handed over one piece. Despite this deception, the
monkeys quickly worked out that the second salesman
offered the better overall deal, and came to prefer
him.

In the second trading regime, the salesman offering
one piece of apple would, half the time, add a free
bonus piece once the disc had been handed over. The
salesman offering two pieces would, as in the first
regime, actually hand over only one of them half the
time. In this case, the average outcome was identical,
but the monkeys quickly reversed their behaviour from
the first regime and came to prefer trading with the
first salesman.

In the third regime, the second salesman always took
the second piece of apple away before handing over the
goods, while the first never gave freebies. So, once
again, the outcomes were identical. In this case,
however, the monkeys preferred the first salesman even
more strongly than in the second regime.

What the responses to the second and third regimes
seem to have in common is a preference for avoiding
apparent loss, even though that loss does not, in
strictly economic terms, exist. That such behaviour
occurs in two primates suggests a common evolutionary
origin. It must, therefore, have an adaptive
explanation.

What that explanation is has yet to be worked out. One
possibility is that in nature, with a food supply that
is often barely adequate, losses that lead to the
pangs of hunger are felt more keenly than gains that
lead to the comfort of satiety. Agriculture has
changed that calculus, but people still have the
attitudes of the hunter-gatherer wired into them.
Economists take note.




                
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