Oct 22nd, 2009 at 11:31 am
Monkey Economics
Via Brad DeLong you won’t want to miss Keith Chen, Laurie Santos, and Venkat Lakshminarayanan, “How Basic Are Behavioral Biases?: Evidence from Capuchin Monkey Trading Behavior.”
Basically they cooked up an ingenuous experiment to see if capuchin monkeys exhibited the same kind of irrational reference effects and loss aversion that Kahneman & Tversky have demonstrated in humans. The answer is, in short, yes. This suggests that these kind of behavioral biases are very deeply rooted since the last common ancestor between humans and monkeys was many millions of years ago. It’s not really a terribly surprising result once you think about it, but definitely a clever line of inquiry.
53 Responses to “Monkey Economics”
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October 22nd, 2009 at 11:38 am
Basically they cooked up an ingenuous experiment
I’d say the typo is pretty Freudian this time. So your behavioral model is good at predicting outcomes for monkeys and for humans? Fabulous. I guess that’s why we see so many similarities between the monkey and human economies.
If you’re going to put forward a theory that supposedly has explanatory value for the economy (ie, humans dealing with one another), it better not be so general as to apply equally well to all animals.
October 22nd, 2009 at 11:44 am
I, too, think the “ingenuous” typo is funny, but I’m not sure of Marshall’s broader point. As an empirical matter, humans exhibit behavioral biases, in economic affairs as well as other arenas. The study indicates (not surprisingly) that other mammals do, too — strengthening the already well supported proposition that the difference between humans and other animals is not so radical as we like to think.
October 22nd, 2009 at 11:51 am
strengthening the already well supported proposition that the difference between humans and other animals is not so radical as we like to think.
Which would be fine as the conclusion of an evolutionary biology paper. But the larger research agenda of behavioral economics is to come up with models of human behavior that explain outcomes in the (human) economy. I honestly don’t understand why human-animal similarities serve that research agenda at all: the conclusion is that behavioral economists can’t get any more specific than explaining a range of outcomes common to both humans and monkeys. Yet the economic phenomena we’re trying to explain don’t occur in the monkey economy because the monkey economy consists of individuals looking around the forest for food.
From the standpoint of “why are humans the way they are?” this is meaningful work. But that’s not really what economists care about.
October 22nd, 2009 at 11:58 am
But that’s not really what economists care about.
So much the worse for economists. Perhaps they should try being interested in more things?
October 22nd, 2009 at 12:02 pm
From the standpoint of “why are humans the way they are?” this is meaningful work. But that’s not really what economists care about.
Since economics is all about human interactions, “why are humans the way they are?” should be something that economists care about.
October 22nd, 2009 at 12:06 pm
“why are humans the way they are?” should be something that economists care about.
Not really. “What is the way that humans are?” or some less stilted version of the question is what economics is about. Not “why?”
October 22nd, 2009 at 12:08 pm
I think the poop-flinging must be deeply ingrained as well.
October 22nd, 2009 at 12:10 pm
A study showing that animals display rational self-interest and irrational emotional behavior seems more likely to interest evolutionary biologists, not economists.
Perhaps Chen, Santos, and Lakshmrrninryanayiyanyinaninan should consider switching disciplines, as they clearly have a gift for superimposing anthropomorphic readings onto any kind of text whatsoever. Could be a whole new school of lit theory.
October 22nd, 2009 at 12:21 pm
Poop flinging! Who does that? No one flings anything anymore. They throw.
October 22nd, 2009 at 12:23 pm
Re: Lakshmrrninryanayiyanyinaninan
Chr*st save me from the peanut gallery.
It’s not that difficult to say.
“Lakshmi” + “Narayanan’
“Narayanan’ being pronounced more or less as three syllables.
I mean really, if you find it easy to pronounce a name like “Skrzypczak’ then I don’t buy that “Lakshminarayanan” is that hard to say.
October 22nd, 2009 at 12:26 pm
Not to mention that “Lakshmrrninryanayiyanyinaninan” is racist, more or less the equivalent of “Ching Hong Chong Dong” or some such.
October 22nd, 2009 at 12:28 pm
So, the smartest guy in the room is a monkey. I knew that already, but it’s not generally understood. I’m curious about the earlier economic studies with rats and pigeons.
October 22nd, 2009 at 12:30 pm
“What is the way that humans are?” or some less stilted version of the question is what economics is about. Not “why?”
It’s true that many economists don’t want to fully explore the topic. They are the ones that already know the answer they want to arrive at.
October 22nd, 2009 at 12:33 pm
The study indicates (not surprisingly) that other mammals do, too — strengthening the already well supported proposition that the difference between humans and other animals is not so radical as we like to think.
C.f. Ecclesiastes 3:19 (and similar passages). This passage seems to be widely ignored though by the “but mens are special and not descended from monkeys” crowd amongst the fundies.
October 22nd, 2009 at 12:41 pm
For shame, Matt, you forgot to twist this work to show that it implies political position P is correct and/or political position ~P is incorrect.
Some attempts:
1. This work shows that free market capitalism is the only possible system, because human nature cannot be changed, since it contains aspects that have remained unchanged in the human evolutionary lineage in humans and their cousins diverged for tens of millions of years. Therefore, socialism, which is dependent on “blank slate” assumptions about the malleability of human nature, is not viable. (Okay, that was kinda weak, but it’s the best right-wing interpretation I can come up with on short notice.)
2. This work shows that state market interventions have a good chance of being both just and efficient. The efficiency of free markets depends on assumptions of human rationality that are not only false, but which are false for distant cousins of humans diverged tens of millions of years ago. This demonstrates a natural tendency based in nature, not cultural variation. As such, truly free markets will inherently be plagued by inefficiency resulting from irrationality (as neoclassical economics defines it). As such, judicious state intervention has a good chance of leading not merely to what many might consider a more equitable distribution of rewards, but a system which is actually Pareto dominant over pure free markets, with their wastefulness and irrationality.
October 22nd, 2009 at 12:46 pm
they clearly have a gift for superimposing anthropomorphic readings onto any kind of text whatsoever. Could be a whole new school of lit theory.
They could go into chemistry — chemistry is a lot easier to understand if you simply personify the various molecules and atoms involved.
As to the larger point (well besides the crassness already addressed), I, along with some others here, don’t get the “this is not economics” argument. If economics is about the study of “What is the way that humans are?” (economically speaking) then isn’t it relevant to fully know what behaviors are unique to humans and which are not? And also relevant to realize, in discussing economics, that we are not rational automatons but rather are basically beasts with slightly better brains?
I agree with ron. Too often it seems that too many economists are not actually interested in how humans actually behave (in economic spheres) but rather in assuming humans behave in a certain way and trying to deduce all of the consequences of those assumptions.
To connect this to previous topics here, as much as I may have issues with “Freakonomics”, at least the emphasis on clean identification, etc., is some sort of attempt to properly frame and answer scientifically answerable questions about human behavior (in the way that economics seeks to quantify aspects of human behavior). Freakonomics might still be a junk science of a sort and also defeatist in substituting cleverness for a desire “to answer big questions”, but it’s a step above economists “trying to answer big questions” and getting all sorts of b.s. answers because they make too many wrong-headed assumptions about how the humans who make up economic systems behave in the first place.
October 22nd, 2009 at 12:51 pm
Perhaps I am ideologically blinded, but Julian Elson’s point #2 seems reasonable to this DFH.
I think the larger point is that, given “irrationality” has stood the test of time and natural selection, maybe “irrationality” is not so irrational after all? Perhaps it is economists who have the wrong definition of “rationality”.
Or perhaps G.B. Shaw was right — all progress depends on unreasonable people. Thus, irrationality gets propagated through the gene pool and rationality does not because communities full of reasonable people end up getting stuck and are competed out of resources by us lunatic lefty moonbats?
October 22nd, 2009 at 12:58 pm
That, and the fact that these mental habits are so deeply ingrained that they can’t be eliminated just by some Chicago economists lecturing people on how to be “rational”.
October 22nd, 2009 at 12:59 pm
Mashall, you’re absolutely right. Unfortunately, their economic theories will never actually work until they start incorporating actual human behavior instead of la-la fiary-land behavior into their models.
Really, if they didn’t tell rich people what they wanted to hear, Economics would join eugenics and ethnology in the scrap-heap of BS psuedo-sciences. Not because it’s not a valid field, but because everyone involved in it refuses to acknowledge that they are studying human behavior and not natural laws.
October 22nd, 2009 at 12:59 pm
For what it’s worth, #2 seemed reasonable to me too (much more so than #1, with it’s question-begging about “naturalness” of capitalism and the “blank slate-ism” of socialism). One must bear in mind the caveat that trying to figure out whether it’s a good idea to limit the tax exemption on employer health benefits to pay for subsidies for expanded coverage based on studies of capuchin behavior is bound to be strained; not everything is about politics, etc.
October 22nd, 2009 at 1:02 pm
but because everyone involved in it refuses to acknowledge that they are studying human behavior and not natural laws. – soullite
IIRC, “Austrian School” economists acknowledge that they are “studying” human behavior. It’s just that they misunderstand human behavior (including their own biases) and moreover are just plain obsessed with gold, gold, gold!
October 22nd, 2009 at 1:02 pm
@Marshall:
From a scientific standpoint this is precisely wrong. The more specific the model is, the more useless it is. A model powerful enough to predict the behavior of a number of species is informing you about something pretty fundamental.
October 22nd, 2009 at 1:05 pm
Hector @10,
I can say it just fine. Spelling it is another matter.
tomemos @11,
I don’t see how it’s racist. The man has a long and (relatively) difficult last name. I wrote something kind of ha-ha pointing that out. So, at the worst, you can call me a name-difficuly-ist, in that I don’t make fun of easier names. In which case, guilty as charged, I guess.
At any rate, I guess it’s not really worth arguing about, whether economists care about the “why” of human behavior or not. DAS @17 has some interesting things to say, at least.
October 22nd, 2009 at 1:17 pm
Re: The man has a long and (relatively) difficult last name.
It’s less difficult then “Bierzychudek” or “Majchrzak” or “Mickiewicz”. (Sorry for picking on the poor Poles).
October 22nd, 2009 at 1:18 pm
isn’t it relevant to fully know what behaviors are unique to humans and which are not?
I don’t think uniqueness is the issue. After all, if economists were going to confine themselves to studying those behaviors and their aggregate outcomes that are unique to humans, this research would prompt them not to study a whole swathe of behavior ranging from rational self-interest to emotion-driven myopia.
And also relevant to realize, in discussing economics, that we are not rational automatons but rather are basically beasts with slightly better brains?
If behavioral economists come up with some model of aggregate behavior based on the latter proposition that performs better than models based on the former, I’ll start to believe that micro findings of non-rational behavior can be mined for insights into aggregate outcomes. But, at least from what I’ve seen, behavioral economists haven’t really done this in a way that’s better than sticking to the rational actor and getting better at characterizing the problem that he’s actually trying to solve.
Too often it seems that too many economists are not actually interested in how humans actually behave (in economic spheres) but rather in assuming humans behave in a certain way and trying to deduce all of the consequences of those assumptions.
Yeah, that’s basically right. And if it were the case that some other approach than assuming rationality performed better, I would say that economics would have severe problems. (Though, it needs to be repeated and repeated, some of the most important and widely applicable findings in economics do NOT assume rationality or rely on it in any way. Such as that aggregate behavior responds to price incentives.)
I happen to think the economists are most likely to go wrong when they decide that a particular model is the one that best represents some agent’s problem, solve the model for optimal choices, and then find that agents do not do what their model says they would and so argue that there are “gains” or “improvements” to be had by altering behavior. That’s what I criticized Levitt for yesterday. Doctrines of rationality and revealed preference state that observed behavior is by definition optimal, so if observed behavior does not correspond to the optimal outcome in your model, your model is not a good one!
October 22nd, 2009 at 1:23 pm
Bet if one monkey found a way to get control of most of the tokens, leaving most of the other monkeys hungry, they’d kill the hairy little son of a bitch rather than put him on a pedestal and natter on about how smart he was.
October 22nd, 2009 at 1:28 pm
From a scientific standpoint this is precisely wrong. The more specific the model is, the more useless it is. A model powerful enough to predict the behavior of a number of species is informing you about something pretty fundamental.
Fundamental, yes, but not helpful. Clearly some scale needs to be drawn into this conversation. A model that explains both human and animal behavior might be correct, but it likely won’t generate sufficiently specific predictions about outcomes in the human economy from, say, changing circumstances or policies. If we confine ourselves to the human economy, then a model of financial crises whose parameters can be estimated with great precision from Iceland’s data but which turns out to be useless in analyzing the UK’s is, as you suggest, too specific to be really helpful.
October 22nd, 2009 at 1:29 pm
they’d kill the hairy little son of a bitch rather than put him on a pedestal and natter on about how smart he was.
Not if the rich one bribed the others.
October 22nd, 2009 at 1:32 pm
good point
October 22nd, 2009 at 1:34 pm
Any fundamental discovery is likely to be helpful. Our entire civilization, and every civilization, was built on fundamental discoveries, the helpfulness of which may not have been apparent at the time. As has already been said, what is interesting about this discovery is the possibility that behavioural biases may be evolutionary advantageous, that could open up a whole world of new and potential research.
Or, this could be completely useless and a scientific curiosity, you never know with research. But never deride something that is “fundamental but not helpful”. Sometimes those are the biggest breakthroughs.
October 22nd, 2009 at 1:41 pm
If you consider that humans were making decisions 50,000 years ago, when their brains were presumably much less developed than now, or that 2 year-olds make decisions when they don’t even have a long-term memory, then the idea that human decision-making involves something other than the forebrain seems like something to credit.
October 22nd, 2009 at 1:51 pm
In fact, it does not. There are things, such as convergent evolution, that could cause this to arise without it being linked to some common ancestor. What if another type of closely related monkey didn’t have it? This type of flawed reasoning occurs frequently in interpreting monkey/chimp literature.
October 22nd, 2009 at 1:52 pm
“humans were making decisions 50,000 years ago, when their brains were presumably much less developed than now”
Humans’ brains were presumably much less developed then, in that it is possible to presume that to be the case, but do you have any reasons we should presume human brains of fifty millennia ago were “much less developed than now?”
October 22nd, 2009 at 1:53 pm
Furthermore, studies of brain-damaged humans demonstrate that some with perfectly functioning forebrains are unable to decide on the simplest choices due to damage to their “lizard brains”.
Cognition is great, but emotion is required to make a decision.
October 22nd, 2009 at 1:54 pm
And B.F. Skinner did his studies on rats. Food pellets/electric shocks are the foundation for incentive pay schemes.
Now the U.S. Capitol is full of extrinsically motivated rats. Which bar do I press to vote them out of office?
October 22nd, 2009 at 1:58 pm
Humans’ brains were presumably much less developed then, in that it is possible to presume that to be the case, but do you have any reasons we should presume human brains of fifty millennia ago were “much less developed than now?”
In a word, evolution.
October 22nd, 2009 at 2:06 pm
So Goldman Sachs treats their customers like monkeys?
Stock Upgrade = displaying food quantity
Goldman traders sell after retail upgrade, locking in the firm’s huge profits on that security.
Stock purchaser = monkey, trying to figure out what he actually got.
October 22nd, 2009 at 2:07 pm
Our recent economic crisis was a failure of culture. Wall Street moguls have the same brains as spear wielders in the rain forest. Our culture allows a handful of people to bet everybody’s farm for their own enrichment.
October 22nd, 2009 at 2:39 pm
I believe the first fully modern humans left Africa about 50,000 years ago. 50,000 years isn’t much time for evolution really so it doesn’t stand to reason that our brains changed very much in that time. One needs to provide back up to make that claim.
October 22nd, 2009 at 2:55 pm
“In a word, evolution.”
It’s hard to know how to respond to a one word argument. Evolution has certainly done some things with humanity over the past fifty millennia: widespread adult lactase production, reduced melanin in more polar populations, alterations of proportions of blood types (like increase type O) in response to plagues, etc.
More acute eyesight is nice. Stronger muscles are nice. Quicker reflexes are nice. Stronger immune systems are nice. Greater intelligence is nice. Is intelligence particularly adaptive? Or are humans of today just better than humans of 50K BC, with evolution following a Couéist teleology: every generation, in every way, our species gets better and better?
October 22nd, 2009 at 3:44 pm
“This suggests that these kind of behavioral biases are very deeply rooted since the last common ancestor between humans and monkeys was many millions of years ago.”
I wonder about that. Loss aversion doesn’t necessarily strike be as a very idiosyncratic kind of behavior, such that it should surprise us if some other creature uses it. It seems like a pretty decent method of maximizing benefits in a pinch, where you can’t or don’t want to add up all the costs and benefits of different actions. The logic of strategic action and the difficult of fully accurate calculations suggests that we should expect to see loss aversion among creatures that aren’t genetically related.
“Our recent economic crisis was a failure of culture. Wall Street moguls have the same brains as spear wielders in the rain forest. Our culture allows a handful of people to bet everybody’s farm for their own enrichment.”
Betting with other people’s money seems like a really great way to bet. Perhaps the fact that the bankers saw nothing morally wrong with this is a defect of culture, but beyond that it’s a simple rational calculation.
October 22nd, 2009 at 3:56 pm
I can’t prove that human brains are more developed today vs 50,000 years ago. I can point out that evolution says that organisms adapt to their environment and that other adaptations are evident in that time span, e.g. skin color.
Since there has been a consistent increase in the stimuli offered by the environment in the last 50,000 years(e.g. writing, math, organized learning, etc.), I would guess that those stimuli have led to increased development.
If your position is that all the elements were there 50,000 years ago, I can’t prove you wrong. If the time is extended to 1 million years ago, and hominids, then brain size says their brains were less developed. And they were making decisions too (I presume, I can’t prove that either).
October 22nd, 2009 at 4:19 pm
I read the paper and I don’t think any of the experiments actually demonstrate what the authors claim: notably, “irrational” loss aversion. They found that the monkeys prefer to trade with an experimenter demonstrating 1 reward and giving 1 than an experimenter demonstrating 2 and giving 1. But this is an equal trade, so this preference is of no benefit, but not of any loss either–thus not irrational (the authors claim that there is some cognitive cost to making this choice but this would seem to be negligible to a mind capable of carrying out far more complex analysis).
I suspect that there is some value placed on “honesty” for solid rational reasons and if that is going on here, it would be interesting to measure with greater precision how much this honesty is worth–or alternatively, how risk averse these monkeys are. But that requires an actual cost to the more risk-averse decision, which none of the experiments include.
Still, interesting paper. I think good animal models is exactly what economics needs.
October 22nd, 2009 at 4:28 pm
23 -Aren’t Lakshmis usually chicks? Like my favorite Lakshmi:
http://www.amazon.com/Lakshmi-Shankar/e/B000APFNJI
October 22nd, 2009 at 5:02 pm
Re: George Allens’ Macaque
Yes, Lakshmi is a girl’s name, from the Hindu goddess of wealth. Which makes the illiterate yahoo I responded to above even dumber.
October 22nd, 2009 at 5:04 pm
Ok, apologies, to Poetry, their first name is “Venkat” which is a guy’s name. Sorry.
October 22nd, 2009 at 7:00 pm
To defend poetry a bit, aren’t/weren’t there a lot of jokes about airdropping vowels to the Serbians? Not to mention Hector’s mention of difficult Polish names. Surely that would be as racist as poetry’s “Lakshmrrninryanayiyanyinaninan”.
I was watching ‘Deadwood’ last night, so I’m reminded of Tolliver berating ‘Jeaninaninanine’ and nicknaming her ‘Stupid’. Perhaps it’s just something about unfamiliar names.
October 22nd, 2009 at 9:29 pm
…strengthening the already well supported proposition that the difference between humans and other animals is not so radical as we like to think.
I think that if you look at human population/economic growth over the past 150 to 200 years, it’s not really a slam dunk to claim that humans are any smarter than yeast in a petri dish, let alone monkeys. Just saying.
October 22nd, 2009 at 9:39 pm
Cognition is great, but emotion is required to make a decision.
A stake in the outcome is required to make an intelligent one.
October 23rd, 2009 at 12:56 am
Is loss aversion the same as when a football coach mutters after a tough loss “I hate losing twice as much as I love winning.” Is that why they get so conservative down the stretch -and go prevent?
And where does the cat fit in? I know that no animal in nature is more risk adverse -I have 35 years of documentation to prove this. And yet, no animal so often volunteers to throw caution to the wind and risk life and limb for no discernible reason.
October 23rd, 2009 at 1:05 am
Racism (like all moral deficiencies), should be measured by actions, not words.
You can pronounce an Indian man’s name correctly with the utmost Presbyterian sobriety — even as you refuse him service in your restaurant because you don’t like his heritage.
Conversely, you can take his coat and personally pull out a chair for him, while having a genial (if presumptively personal) chuckle over the difficulty of his name on your incompetent American tongue.
Which is worse?
For example, I was recently in South Korea. The South Koreans couldn’t pronounce my very German name correctly to save their lives. However, many of them succumbed to the very human instinct to laugh at their own ineptitude, and began to ridicule themselves by purposefully mispronouncing my name to an even greater degree.
Does that make them racist? Apparently, to you people. But I just thought it was endearing.
October 23rd, 2009 at 9:16 am
[...] As a friend puts it, this strategy is “literally the equivalent of putting a chip on 35 of the 36 roulette numbers and hoping for no zero/36.” But you’re doing it with borrowed money. I’m not a huge believer in human rationality, so I totally understand how this scam worked once. That he was able to get a second fund off the ground is pretty amazing. If he finds investors for a third spin around the wheel I’m going to propose confiscating all the rich peoples’ money and giving it to capuchin monkeys. [...]
October 23rd, 2009 at 10:55 am
I wonder about that. Loss aversion doesn’t necessarily strike be as a very idiosyncratic kind of behavior, such that it should surprise us if some other creature uses it. It seems like a pretty decent method of maximizing benefits in a pinch, where you can’t or don’t want to add up all the costs and benefits of different actions. The logic of strategic action and the difficult of fully accurate calculations suggests that we should expect to see loss aversion among creatures that aren’t genetically related.
Well said
While loss aversion may sound irrational to an economist when talking about maximizing utility of disposable income in the 21st century, its not in the overall scheme of things
If you told a medieval peasant that by planting a different crop mix he might be able to get 14 months worth of food for the year he would resist the change. Because a year with 14 months worth of food is nice, but a year with 10 months worth of food really, really sucks