Saturday, July 03, 2010

Hunger and risk taking

Understanding risk-taking behaviour is an important topic in behavioural economics. Much of the motivation for behavioural economics arises from various anomalies and paradoxes in behaviour in the areas of risk and intertemporal decision making. However it is not just of theoretical interest: risk-taking affects us all. Recent events in Ireland bring this home with a vengence. Our banks and financial institutions took extraordinary risks for which we are now paying dearly and will continue to do for many years. So what might explain this behaviour?
An interesting study by neuroscientists shows that hungry individuals take more risks. In an experiment, nineteen male participants performed a gambling task on three occasions, one week apart: either after a 14 hour fast, immediately after a 2000 calorie meal or one hour after a 2000 calorie meal. The effect of the meal was to reduce risk aversion. The effect depends on individuals level of adiposity. While one can understand that hunger,a desire to reach a given metabolic state, causes individuals to take greater risks in feeding that hunger - a quick dash into McDonalds perhaps- what is particularly interesting is that this transfers into decision making in another seemingly unrelated domain.
The policy implications would appear to be then that we should keep our bankers well fed: This conflicts somewhat with other people's recommendations, namely that we should starve the lot of them. Still, scientists can't be wrong, can they?

Symmonds, M., Emmanuel, J., Drew, M., Batterham, R., & Dolan, R. (2010). Metabolic State Alters Economic Decision Making under Risk in Humans. PLoS ONE, 5 (6)

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