Gambling
Risk Aversion
ScienceDaily (Feb.
9, 2010) —
Two patients
with rare lesions to the brain have provided direct
of evidence of how we make decisions -- and what makes
us dislike the thought of losing money.
Researchers
at the California Institute of Technology studied a
phenomenon known as 'loss aversion' in two patients
with lesions to the amygdala, a region deep within the
brain involved in emotions and decision-making. The
results of the study, part-funded by the Wellcome Trust,
are published February 8 in the journal Proceedings
of the National Academy of Sciences.
Loss aversion
describes the avoidance of choices which can lead to
losses, even when accompanied by equal or much larger
gains. Examples in the everyday life include how we
make a decision on whether to proceed with an operation:
the more serious the potential complications from the
operation -- even if the risk is low compared to the
chances of success -- the less likely we would be to
proceed. It even has implications on organ donation
rates -- if people are required to 'opt-in' to a system,
they are less likely to move away from the default option.
Dr Benedetto
De Martino, a Sir Henry Wellcome Trust Postdoctoral
Fellow and first author of the report, explains: "Imagine
you're on Who Wants to Be a Millionaire. You've just
answered the £500,000 question correctly and have
moved on to the final question. You're down to your
50:50 lifeline but don't know the answer. If you get
it right, you'll win £1 million; if you get it
wrong, you'll drop back to £32,000. The vast majority
of people would take the 'loss averse option' and walk
away with £500,000."
This new
study has explored whether loss aversion is mediated
by the amygdala, as is currently hypothesised. The researchers
studied two patients affected by a rare genetic condition
which has led to the formation of lesions to the amygdala.
These lesions prevent the patients from perceiving,
recognising or feeling fear. For example, the patients
can recognise all other emotions in a person's face,
but if shown a fearful face they cannot say what emotion
that person is experiencing.
Each patient
-- together with twelve 'healthy' controls -- took part
in a task designed to test whether the chance of losing
money affected people's likelihood to gamble
At the
beginning of the experiment, each participant was given
$50 with which to gamble on the outcome of flipping
a coin, which carries a 50:50 chance of winning (or
losing). However, each time, the amount that the volunteers
could win or lose varied. For example, one time they
might stand to win $50 or lose $20 depending on the
outcome. The second time, they might stand to win $30
or lose $40.
The researchers
found that, as expected, the healthy individuals were
less likely to gamble when the difference between the
potential winnings and potential losses was smaller
-- for example, whilst they might gamble if they stood
to win $50 but lose only $10, they would be less likely
to gamble if they stood to win only $20 but lose $15.
When the potential losses outweighed the potential gains,
the controls would not gamble.
However,
the two patients with impaired amygdala activity were
much less affected by the disparity between potential
gains and losses; occasionally, even when the potential
losses outweighed the potential gains they would choose
to gamble, showing a lack of loss aversion.
"A
fully-functioning amygdala appears to make us more cautious,"
explains Ralph Adolphs, the Bren Professor of Psychology
and Neuroscience. "We already know that the amygdala
is involved in processing fear, and it also appears
to make us 'afraid' to risk losing money."
"It
may be that the amygdala controls a very general biological
mechanism for inhibiting risky behaviour when outcomes
are potentially negative, such as the monetary loss
aversion which shapes our everyday financial decisions,"
comments Dr De Martino, a visiting researcher from UCL
(University College London).
"Loss
aversion has been observed in many economic studies,
from monkeys trading tokens for food to people on high-stakes
game shows," adds Colin Camerer, the Robert Kirby
Professor of Behavioral Economics, "but this is
the first clear evidence of a special brain structure
which is responsible for fear of those losses."
Dr De Martino
and colleagues also investigated whether, as well as
being 'loss averse', the patients were also 'risk averse'.
Risk aversion and loss aversion are two similar, but
not identical, processes and as such can be easily confused.
People who are 'risk averse' are less likely to take
chances even when they do not stand to lose anything.
The volunteers
were again asked to make a decision based on the outcome
of a coin toss. However, in this situation, the options
were either to take a set amount without gambling (for
example, $5), or gamble with a chance of winning $10
or receiving nothing but not losses were involved. In
this experiment, both patients and controls showed little
difference in their decisions, suggesting that the amygdala
goes not control this aspect of risk taking.
The research
was supported by the Gordon and Betty Moore Foundation,
the Human Frontier Science Program, the Wellcome Trust,
the National Institutes of Health, the Simons Foundation,
and a global Center of Excellence grant from the Japanese
government.
