Humans are uniquely smart among all other species on our plant as we are capable of outstanding feats of technology. The questions which suddenly jumped into my mind are; why are we so prone to making mistakes? And why do we make the same mistakes time and time again?
Laurie Santos (Primate Psychologist from Yale University) posed these questions to her team. They were thinking -in particular- of the errors of judgment which led to the crisis of the financial markets happened in 2008.
DR. Laurie Santos
Santos has presented two answers for these questions from her own point of view saying that, humans have designed complicated environments that can’t be fully understood, or we are biologically prone to making bad decisions.
They decided to test the afore-mentioned theories and they selected a group of Brown Capuchin monkeys. Monkeys were selected for this test because they are relatives of humans; they are intelligent and could learn very fast as we know.
Monkeys are not influenced by the technological or cultural environments which affect human decision-making. Laurie Santos and her team wanted to experience whether the capuchin monkeys would make the same mistakes when making financial decisions when they are put into similar situations.
The first scientific obstacle they faced was introducing money to the monkeys and they were surprised as monkeys soon cottoned on learning simple techniques of exchange an started to know bargains as when one of the team members offered two grapes in exchange for a metal disc and another team member offered one grape, the monkeys chose the two-grape option.
The monkey market was established effectively and then, the team decided to introduce some problems which humans generally get wrong. One of these issues is risk-taking. Imagine that someone gave you $1000 and you can receive either A) an additional $500 or B) someone tosses a coin and if it lands 'heads' you receive additional $1000, but if it land 'tails' you receive no more money. Of these options, most people will choose option A. They prefer guaranteed earning, rather than running the risk of receiving nothing.
Now, imagine a second situation in which you are given $2000. You can choose A) lose $500 leaving you with a total $1500, or B) toss a coin; if it lands 'heads' you don’t lose anything, but if it lands 'tails' you lose $1000, leaving you with just $1000. The risky option B will be the choice of most of us since we stand to lose money.
From experiences of financial investors and gamblers, it is unwise to take risks when we are on a losing streak
So, would the monkeys make the same basic errors of judgment? The team put them to the test via giving them similar options. In the first test, monkeys had the option of exchanging their metal disc for one grape and receiving one bonus grape or exchanging the grape for one and sometimes receiving two grapes and sometimes receiving plenty. Then the experience was reversed, and monkeys were offered three grapes, but in option A were only given two grapes. In option B, they had fifty-fifty chance of receiving all three grapes or one grape only. The results were that monkeys, like humans, take more risks in times of loss.