Emotions and Decisions
By Arnold Kling
The Wall Street Journal reports on a neuroeconomics experiment that compared emotionally-impaired investors with normal investors.
The 15 brain-damaged participants that were the focus of the study had normal IQs, and the areas of their brains responsible for logic and cognitive reasoning were intact. But they had lesions in the region of the brain that controls emotions, which inhibited their ability to experience basic feelings such as fear or anxiety. The lesions were due to a range of causes, including stroke and disease, but they impaired the participants’ emotional functioning in a similar manner.
The study suggests the participants’ lack of emotional responsiveness actually gave them an advantage when they played a simple investment game. The emotionally impaired players were more willing to take gambles that had high payoffs because they lacked fear. Players with undamaged brain wiring, however, were more cautious and reactive during the game, and wound up with less money at the end.
I remember in the 1960’s best-seller The Money Game, author “Adam Smith” argued that emotion was the enemy of the stock market investor. “If you don’t know who you are, this is an expensive place to find out,” he wrote.
But do not jump to conclusions based on one small study. A few months ago, Business Week wrote,
Neuroeconomics also challenges the notion that emotions can only corrupt economic decision-making. Indeed, emotions grab people’s attention and motivate them to focus their rational brains on the issue at hand, says Antonio R. Damasio, a University of Iowa College of Medicine neurologist who studies brain-damaged patients. In his writings, he says that people who feel no emotions are bad at making decisions.
God, send me a one-handed neuroeconomist.