It’s rare that I link to a CNBC story, but I don’t have much of a choice today. They’ve discussed the results of an interesting study the links hunger to our appetite for risk.
The study took 19 people and gave them options of greater risk/greater reward or reduced risk/reward. On separate occasions the 19 people were given these options after eating a 2000 calorie meal, and hour after eating a 2000 calorie meal, and after fasting for 14 hours. As it turns out there is a correlation between hunger and risk. The hungrier you are, the more likely you are to take a risk.
This makes perfect sense. Think about your primal self. You’ve been stranded in the woods for an hour. You’re hungry, but not dying, and see some berries in a bush near-by. You consider eating them but they might be poisonous or make you sick. You decide not to eat and wait for rescue. But after 2 days your mind is operating differently. You’re ready to eat anything. You take the chance and eat the berries.
The example CNBC uses likens it back to finance. It mentions some traders that worked in offices that made sure food was plentiful so they never took bad risks. But I think this is much bigger than just Wall Street. I’m thinking about doctors and nurses that work 12 hour shifts. I’ll bet many of them skip meals. Or soldiers currently in a situation where food is scarce. The implications go far beyond Wall Street. I’d really like to see this study expanded to see just how serious these effects could be.
And this is why I don’t usually like CNBC, they tried to tie this back to policy instead of just an interesting behavioral economics piece. They speculate on how this might apply to the unemployed. For example, if you collect unemployment, you’re always getting that 2000 calorie diet. You have no reason to take risks. Interpret “risk” as you will, but I see this as someone collecting unemployment won’t take risks such as getting a job outside of their comfort zone or starting a business. That’s the spin CNBC tried to make. I don’t buy into it, but would love to see some studies about this sort of thing.
Photo: giumaiolini
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
