What can neuroscience teach us about financial risk?

Neuroscientists at the California Institute of Technology report that the amygdalae – two almond-shaped clusters of tissue located deep in the brain and which register rapid emotional reactions – are responsible for the fear of losing money.

In a previous blog post I described how the size of your amygdala (plural; amygdalae) is related to the size of your social network. Well it gets a lot more interesting!  A recent study of amygdala-damaged patients – described in a paper entitled Amygdala damage eliminates monetary loss aversion in the prestigious scientific journal Proceedings of the National Academy of Sciences (PNAS) – may also offer insight into the state of your monthly bank balance.

The study involved an examination of two patients whose amygdalae had been destroyed due to a very rare genetic disease; those patients, along with individuals without amygdala damage, volunteered to participate in a simple gambling task.

In the task, all individuals were asked whether or not they were willing to accept a variety of gambles, each with a different possible gain or loss.

For example, all individuals were asked to choose from the following three gambles.

1. Take a gamble to win $20 or lose $5 (a risk most people will choose to accept).
2. Take a gamble to win $20 or lose $20 (a risk most people will not choose to accept).
3. Take a gamble to win $20 or lose $15 (a risk most people will reject even though the net expected outcome here is positive).

It turns out that both of the amygdala-damaged patients took risky gambles much more often and showed no aversion to monetary loss whatsoever, in sharp contrast to those individuals of the same age and education who had no amygdala damage.

The findings suggest that the amygdala is critical for triggering a sense of caution toward making gambles in which you might lose – similar to its role in fear and anxiety. Your brain’s very own Fort Knox!

Who knows but sometime in the future we may be required to undergo a brain scan to check the size of our amygdalae in order to qualify for a credit card, enrol for a business degree or manage a bank!

Maybe the next ten years of brain research should be dedicated – the decade of the amygdala – to help us relearn a healthy sense of respect for money and get us back into the black?