THE VIEW FROM HERE: Loss adversion

I fall into that age bracket of people who are unempowered and
equally uninspired to deal with the rapidly changing world of
electronic gadgets. That is what I found so intriguing about the
research project which Sokol-Hessner is doing in the field of
neuroeconomics. He is using state-of-the art imaging technology to
study ³loss adversion,² which I have in abundance.
According to John Cassidy, who wrote the article, economists now
have a series of experiments to prove how adverse we are to losing
money. They wouldn¹t need their magnetic-resonance-imaging machine
for testing in my case. I¹m a walking text book of hating to lose
money or take financial risks. Just ask my bridge partners, or in
times past, my father or husband. They could regale you with
stories how when I first learned to play poker with chips that did
not cost anything. I consistently won ‹ ³beginners luck,² my
brother said. When we were older and played with real pennies,
nickels and dimes, I was much more cautious. In Reno, playing the
slots one afternoon, I lost $10 worth of quarters out of a $20
roll. I stopped playing. My husband couldn¹t believe it. He pointed
out that he had given me the $20 to have fun not to save. I didn¹t
need to save $10. I just didn¹t like the idea of not getting
anything for my money.
There is serious purpose behind these studies ‹ involving
intense study by exceptionally qualified people in the fields of
psychology and economics. Colin Camerer, an economist at Caltech,
is one of Sokol-Hessner¹s thesis advisers. He was admitted to Johns
Hopkins College at the age of 14, majoring in the field of
mathematics.
In order to predict economic decisions economists needed to be
able to predict human reasons for risk taking and loss adversion.
They could only do this if human behavior were both rational and
predictable. You don¹t need a PhD in psychology to know this isn¹t
about to happen. What is different now according to Jonathan Cohen
writing in the Journal of Economic Perspectives ³is that
researchers today have the tools to begin to identify and
characterize these systems at the level of their physical
implementation in the human brain. Neuroscience gives detailed
access to the mechanisms that underlie behavior and thus may allow
scientists to answer questions that cannot be answered easily, or
at all, by observing behavior alone.²
Not all economists agree and for good reason. There is probably
a fair percentage of people in my category ‹ the ³a bird in hand is
worth two in the bush.² People who seldom take a chance. This
proverb can be traced back to Plutarch¹s Of Garrulity, written A.D.
100, ³He is a fool who lets slip a bird in the hand for a bird in
the bush.² Other versions of this proverb can be found in many
languages including German, French, Old English and Italian. The
best that economists can hope for is that their new tools and
studies will indicate there are not too many of us afflicted with
³Loss Adversion.²
Lucie Jensen is a Healdsburg resident.