The Effect of Hunger on Economic Decision Making Critique of Symmonds, M., Emmanuel, J., Drew, M., Batterham, R. & Dolan, R. (2010) Andrew Ng & Will Rees

Metabolic State Alters Economic Decision Making under Risk in Humans Aim: A study to define whether a change in our metabolic state influences our attitude to risk, specifically in making monetary decisions Hypothesis: Baseline metabolic reserves and alterations in metabolic state would systematically modulate decision making and financial risk taking in humans. Prediction: Individuals making monetary decisions would become more risk-averse after feeding if the meal had a larger impact on metabolic state (i.e. larger fall in ghrelin).

Metabolic State Alters Economic Decision Making under Risk in Humans Used 24 male volunteers, later reduced to 19 after exclusions. During experiment, took levels of 2 hormones; 1 signalling nutrient intake and 1 indicating energy reserve levels. Participants presented with sequence of 200 paired lotteries, each constructed with varying probabilities of 6 possible monetary prizes. Source: Symmonds et al. (2010)

Metabolic State Alters Economic Decision Making under Risk in Humans Source: Symmonds et al. (2010)

Metabolic State Alters Economic Decision Making under Risk in Humans Result: Source: Symmonds et al. (2010)

Metabolic State Alters Economic Decision Making under Risk in Humans Found that changes in metabolic state systematically altered economic decision making. When hormone levels showed larger nutritional intake, participants became more risk-averse A small effect of the meal, less than anticipated, correlated with greater risk seeking.

Prospect Theory “Prospect theory...emphasises that risk attitude in humans is reference dependent. When choosing between options yielding gains, humans are on average risk averse, while when choosing between options yielding losses below a reference point, humans make riskier choices” (Symmonds et. al. 2010) Losses are felt more strongly than gains!

Prospect Theory - Application  “Sensitivity to risk is systematically influenced by a metabolic reference point” (Symmonds el at., 2010)  So, when animals are foraging in the wild, they become more less risk-averse when they are below the metabolic reference point, and vice-versa.  This is linked to the hypothesis of Symmonds et. al – They believed changes in economic decision making would occur with participants either above or below the metabolic reference point.

Sample Size Neglect When judging the likelihood that a data set was generated by a particular model, people often fail to take the size of the sample into account: after all, a small sample can be just as representative as a large one

Sample Size Neglect In this experiment, there were only 19 male participants which is relative small! Source: Symmonds et al. (2010)

Sample Size Neglect Source: Symmonds et al. (2010)

Overconfidence bias Overconfidence can be seen when people put too much faith in their own abilities and judgements. Overconfidence and high optimism could therefore have led experimenters to focus too much on their findings, which, in turn, could lead to confirmatory bias…

Confirmatory bias Strong prior beliefs can lead to ambiguous results being over-interpreted in order to back up original beliefs. They explain in discussion how their findings are consistent with their predictions and knowledge of prospect theory, in spite of the ambiguity of the results.

Other Issues - Gender Differences Women typically are thought to be more risk averse than men. Women were more than four times as likely as men to choose the risk-free gamble and about one-third as likely to choose the highest-risk gamble (Eckel & Grossman, 2002).

Other Issues - Gender Differences A meta-analysis by Byrnes, Miller, and Schafer (1999) reviewed over 150 papers on gender differences in risk perception. They concluded that the literature “clearly” indicated that “male participants are more likely to take risks than female participants”

Other Issues – Personality Differences Previous findings have demonstrated that female scored higher than men on neuroticism in all countries, and men obtained higher means than women on psychoticism in 34 countries and on extraversion in 30 countries (Lynn and Martin, 1997 ). Extraversion and openness predict risk-taking and conscientiousness predicts risk aversion (Soane and Chmiel, 2005).

Other issues – Individual Differences Emotion (Raghunathan & Pham, 1999) ◦ Sad people found to prefer higher risk/higher reward options ◦ Anxious people found to prefer low risk/low reward options Age o Older people take fewer financial risks than younger people Occupation/SSE Cultural Study finds Singaporeans and Chinese to be less risk averse than Dutch and New Zealand people over both a gain and a loss frame when making a personal financial decision (Marshall et. al., 2011)

Improvements to study in student population Similar method, but more comprehensive. Take account for all variables possible: ◦ Gender – Use both male and female undergrads, recruit more than just 19 participants. ◦ Personality – Administer broad personality tests to all participants before study, accounting for Big 5 traits, as well as smaller ones inc. trait mood and anxiety. ◦ Occupation – Use students from wide range of courses, including maths/stats, business, and others for comparison

Implications and Applications Although only applicable to small number within the population, study does have some uses. Does prove, to an extent, when making economic decisions metabolic state and nutritional intake are important factors to consider (in men at least!). When making personal and/or professional economic decisions, should be manipulated around meal times.

Implications and Applications Can be applied to many real world situations: ◦ Making personal decisions about applying for mortgages, loans or credit cards! ◦ Trading on stock exchange – Buying and Selling around local meal times. ◦ Going down to ladbrokes or casino only after a particularly heavy meal!

Conclusions Overall, Study has important points to it and is definitely useful. Expands on previous research when it comes to risk taking and hunger, important when looking at prospect theory. Implications and Applications can become very important first step when looking deeper into issue of metabolic state and financial risk taking!

Conclusions However, several sample issues need to be addressed for future research. Larger, more representative samples in future research would provide much stronger insight into exactly how hunger and metabolic state influences financial decision making. Overall – very useful research if viewed as a first step. Replicating methodology with better samples could prove very useful!