MANKIND’S TENDENCY to keep making the same mistakes which lead to events such as the global financial crisis may be evolutionary in origin.
Capuchin monkeys, who are very close to us in evolutionary terms, show the same irrational tendencies towards money as we do.
Researchers at Yale University in the US carried out experiments on monkeys using tokens which were exchanged for food. They found the monkeys did not save but spent what they had, and there was also evidence of widespread theft of tokens in the troop.
The researchers found that humans and monkeys are also similar in the manner in which they deal with potential losses.
They found that human beings, if given $1,000, will play it safe if they are given two choices.
The first choice is between flipping a coin which would lead to the person doubling the amount or being left with nothing. Alternatively, a person would be guaranteed $500. Humans tended to pick the safest option.
However, when the money was doubled to $2,000 and people were given a choice between a flipped coin which would leave them with the same amount of money or nothing, or an alternative arrangement where they had to hand over $500 and keep $1,500, they chose the risky option of losing everything.
Dr Laurie Santos, an associate professor at Yale, told the TEDGlobal conference in Oxford that monkeys exhibited the same tendencies. They tended to act rationally in choosing the monkey salesman who always gave them the same amount of food for their token over the salesman who fluctuated between more or none.
However, when the salesman started taking the treats away, they went with the one who either took away none or several of the treats rather than one who only took away one at a time.
“The most surprising thing is that when we collaborated with economists looking at the monkey data using economic tools, they match qualitatively and quantitatively to what humans do,” said Dr Santos.
She said monkeys, like humans, had trouble in thinking in absolute terms about things, hence their tendency to risk everything although in the second experiment they would still be up $1,500.
She said financial markets demonstrated that when people have a loss mindset they take greater risks, ie holding on to falling stocks longer than they should do.
“We wanted to see where these errors came from. It may be down to the very nature of our evolutionary history,” Dr Santos told the conference which is one of the world’s foremost think tanks for new ideas. “If we believe the Capuchin monkey results, we are adapting strategies that are 35 million years old.”