Irrational Economic Behavior – It’s In Monkeys Too

Monkeys have demonstrated buying behavior that is just as irrational as that of humans.

In their studies monkeys were given a budget of disks and asked to decide how much to spend on apples, and how much to spend on the gelatin cubes, even as the prices of these goods and the size of their budgets fluctuated. Capuchins performed much like humans do. Capuchins, like humans, react rationally to these fluctuations.

In a second experiment, capuchins were asked to choose between spending a token on one visible piece of food that half the time gave a return of two pieces, or two pieces of visible food, that half the time gave a return of only one piece. Economic theory predicts that consumers should not care which of these outcomes they receive since they are essentially both 50–50 shots at one or two pieces of food. The capuchins, however, vastly preferred the first gamble, which is essentially a half chance at a bonus, than the second gamble, which is essentially a half chance at a loss.

"The goal of this work," said Santos, "is to learn whether other animals share some of our basic economic decision processes or whether human economic behavior is unique to our own species."

"The economic view," Chen added, "says people are aware, rational and in control of their major decisions. Social psychology cuts in the opposite direction, maintaining that people are often unaware of the forces that dictate their behavior. We wanted to understand the interactions of these two things. What we've shown is that capuchin monkeys look remarkably like us; making rational decisions in many of the same settings that humans get right, but also make many of the same mistakes we make."

Loss aversion made sense in the past, when food and other necessities were more scarce. It's ironic that something that was such an advantage at one point in history now works against us.