People make the same basic investment decisions as monkeys, scientists find

Now let me say a word about risk-weighting in your portfolios.
Now let me say a word about risk-weighting in your portfolios.
Image: Reuters/Jim Bourg
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Believe it or not, primates may have invisible hands as well as opposable thumbs. New research published this month (registration required) in the journal Proceedings of the National Academy of Sciences (PNAS), and reported at Phys.org, suggests that monkeys can be rational economic actors, just like humans.

Scientists spent 20 days training rhesus macaques to gamble by choosing between pie charts which presented different probabilities of winning water. They were presented with two options: the safe choice offered them at least a little water for sure, while a risky choice generally offered them a bigger ration of water but only a fifty-fifty shot of getting it.

“Wealth” in this experiment was also determined by water—specifically by measuring the concentration of chemicals in the monkeys’ blood to determine how well-hydrated they were. Researchers classed dehydrated monkeys as “poor” and well-hydrated ones as “rich.”

Wealthy monkeys, researchers found, generally took greater risks than poor monkeys. As a macaque became more dehydrated, it became more likely to choose the safe option. A wealthy macaque was more likely to chance getting no water at all for the possibility of getting a lot of it. Taken as a whole, the monkeys were slightly risk-averse; they were a bit more likely to choose the safe option on average.

This pretty much approximates the kind of rational human behavior economists assume when they construct economic models. Poor people tend to invest their money in assets where they know they won’t lose it, like US Treasurys or simple stock-market indices. Richer humans are more comfortable taking risks where they can lose money so long as the reward is sufficiently large.

But the behavior goes beyond the pecuniary domain. The experiment suggests that risk-analysis is genetic. Humans and monkeys make rational decisions based on risk and reward. In similar experiments, birds did not.

“The monkeys… seem to share human risk preferences. They were slightly risk averse and we know that humans would behave similarly in these experimental conditions,” Agnieszka Tymula of the University of Sydney’s School of Economics, one of the researchers, told Phys.org. ”Understanding the biological mechanisms underlying risky behaviours that evolved around satiety may provide unique insights about decision-making and consumption wealth.”