New Yorker Article on Neuroeconomics

[awayfromjay]

I started reading this and found it pretty interesting. It relates to neuroeconomics, "which uses state-of-the-art imaging technology to explore the neural bases of economic decision-making."

It discusses loss aversion and relates it to stock markets and gambling.

http://www.newyorker.com/fact/conten.../060918fa_fact

Apologies if this has already been posted.

[jfk]

Thanks for the link. Good thing they weren't scanning the brains of poker players. They'd never have the same data.

Friends and I were having this discussion the other night about the resistance to 401K contributions and other highly beneficial savings vehicles that they see among their co-workers. One person in the conversation works for in real estate investments and he even sees among his analysts, people paid to do fairly sophisticated quantitative work, an inability to grasp or address fairly basic personal finance realities.

[awayfromjay]

Actually, has there ever been a study like this with poker players? I guess it would be hard to setup, but I think it would be pretty interesting to see some similiar measurements of players during play and outside play.

Maybe there is actually a physiological reason that certain players are good. If their brain operates in a different manner that might be obvious more in their non-poker activites.

[awayfromjay]

I know people who are just too lazy to enroll for 401(k) contributions.

[jfk]

[ QUOTE ]
Actually, has there ever been a study like this with poker players?

[/ QUOTE ]

Whenever I run these prospect theory type questions with people I know (generally speaking, friends of mine), I'm surprised how often they chose the +EV answer. Informally guessing the percentage, I'd say it is somewhere in the neighborhood of three out of four.

This goes against the findings cited by those running the experiments.

The conclusion I've reached is that some poeple think about many things analytically while many others only focus their efforts on things which are of vital importance to them.

This would help explain why someone working as a analyst for a real estate investment company would be unable to see the 401K benefit. A person like that throws their energies into their job and just goes with the answer which seems right for the the other decisions in his/her life. These are the sorts of people who rely on "experts" to guide the judgements in areas in which they have no interest in giving thought.

Naturally, marketing types have picked up on this more quickly than most.

[innerpeace]

fyi, not that long ago there was a series of articles in cardplayer on loss aversion and poker.

[AlanBostick]

[ QUOTE ]
Consider my investment in BT. Back in 2002, there was no way that I could have predicted how much profit the company would make in 2006, let alone in 2010 or 2020. I bought the stock, nonetheless, convinced that it could only increase in value.

[/ QUOTE ]

Ummm, financial statements, combined with the fact that BT, like most telecom firms of the time, had pumped absurd sums of money into mobile phone frequency auctions that had no prayer of earning out?

[whangarei]

Great article. Thanks for the link.

I think the researchers are wrong when they conclude that the rational and emotional "parts" of the brain "compete" when making decisions -- seems to me it's all an integrated process and the "competition" model is misleading.

[DeliciousBass]

[ QUOTE ]
I know people who are just too lazy to enroll for 401(k) contributions.

[/ QUOTE ]

Slightly OT but this is just awesome.

I have coworkers that when I bring up the 401k plan (our company's is pretty sick) will, without fail, "You participate in that!"

This always causes me to laugh and then explain to them why they too, should be investing in the plan. Tough to beat a 100% match, put in whatever you invest in (no friggin' company stock here), fully-vested from day one...Yeah guys, I hate free money too...I'd rather rely on that non-existent pension plan.

[nuggetz87]

nice read. the guy who said it's a good thing they weren't scanning the brains of poker players is right lol. 50% chance of winning $150, 50% chance of losing $100? INSTACALL!!!1