The psychology of overconfidence

Malcolm Gladwell provides an interesting take on how human psychology contributed to the demise of Bear Stearns. [New Yorker]

Advertisements

PNAS roundup: Superresolution in 3D and fetal testosterone of traders

PNAS has some interesting articles that I came across today:

  1. 3D PALM (open access): Using 2-photon and photoactivatable proteins, the authors image beyond the usual sub-wavelength TIRF limits. They image over multiple microns with 50nm resolution.
  2. Neuroeconomics:  Low digit ratio (2d:4d) predicts financial success in traders. Okay, measure the length of your index and ring fingers. (Not sure if this analysis applies for the ladies; the authors only used men in the study.) Calculate the ratio (2d/4d); longer ring fingers signify greater fetal androgen exposure. The mean value is about 0.96. As the authors say,

    Digit ratios have been found to predict performance in competitive sports, such as soccer, rugby, basketball, and skiing, so 2D:4D may also predict the risk preferences and physical speed required for high-frequency trading.

    A strong correlation (r~0.5) was found between low digit ratios and profits in short-term trading. So, they take on more risk and make more money. What I want to know is how well the low 2d:4d ratio traders did over the last 6 months!

A ubiquitous human parasite that shapes human culture?

In the provocative-hypothesis-of-the-week department:

Kevin Lafferty, a parasitologist, has put forth the idea that a fairly ubiquitous parasite (infecting O(10%) of Americans, and up to 2/3 of people in places like Brazil) is responsible for some of the diversity of human culures (1). The parasite uses common housecats to increase its transmission to the next host in the life cycle, and has a subtle effect on human personality, with some studies claiming that it even causes neuroticism, and even schizophrenia. (One clinical report (2) claims that “subjects with latent toxoplasmosis had higher intelligence [and] lower guilt proneness.” Hmm!)

Anyway, Lafferty noted that toxoplasmosis varies in prevalence from world region to world region, and then tries to draw correlates between these prevalences and local cultures:

“Drivers of the geographical variation in the prevalence of this parasite include the effects of climate on the persistence of infectious stages in soil, the cultural practices of food preparation and cats as pets. Some variation in culture, therefore, may ultimately be related to how climate affects the distribution of T. gondii, though the results only explain a fraction of the variation in two of the four cultural dimensions, suggesting that if T. gondii does influence human culture, it is only one among many factors.”

I wonder how one could test this hypothesis? Look for recent immigrants from one culture to another, who have lower Toxoplasmosis incidence? (Preferably finding populations that go in opposite directions, as a control.) Track culture change vs. migration vs. climate change?

Unlikely, perhaps. But nice that people are still thinking big 🙂

Ed

(1) Lafferty, K
Can the common brain parasite, Toxoplasma gondii, influence human culture?
Proceedings of the Royal Society B: Biological Sciences
doi:10.1098/rspb.2006.3641

Picked up by the popular press here

(2) Flegr J, Havlicek J.
Changes in the personality profile of young women with latent toxoplasmosis.
Folia Parasitol (Praha). 1999;46(1):22-8.

Softmax rule for exploration-exploitation

A very nice neuroecon expt. in the newest Nature:

Daw et al. find that humans choose between multiple slot machines (with different payoff probabilities) based on expected value (versus just going with the highest probability one most of the time and then randomly choosing another one every so often). Then, with fMRI, they find brain areas correlated with different value predictions.

News & Views (Daeyol Lee)

Cortical substrates for exploratory decisions in humans (Daw, Dayan)

Abstract:

Decision making in an uncertain environment poses a conflict between the opposing demands of gathering and exploiting information. In a classic illustration of this ‘exploration-exploitation’ dilemma, a gambler choosing between multiple slot machines balances the desire to select what seems, on the basis of accumulated experience, the richest option, against the desire to choose a less familiar option that might turn out more advantageous (and thereby provide information for improving future decisions). Far from representing idle curiosity, such exploration is often critical for organisms to discover how best to harvest resources such as food and water. In appetitive choice, substantial experimental evidence, underpinned by computational reinforcement learning (RL) theory, indicates that a dopaminergic, striatal and medial prefrontal network mediates learning to exploit. In contrast, although exploration has been well studied from both theoretical and ethological perspectives, its neural substrates are much less clear. Here we show, in a gambling task, that human subjects’ choices can be characterized by a computationally well-regarded strategy for addressing the explore/exploit dilemma. Furthermore, using this characterization to classify decisions as exploratory or exploitative, we employ functional magnetic resonance imaging to show that the frontopolar cortex and intraparietal sulcus are preferentially active during exploratory decisions. In contrast, regions of striatum and ventromedial prefrontal cortex exhibit activity characteristic of an involvement in value-based exploitative decision making. The results suggest a model of action selection under uncertainty that involves switching between exploratory and exploitative behavioural modes, and provide a computationally precise characterization of the contribution of key decision-related brain systems to each of these functions.

Neuroecon overview from Tyler Cowen

Enter the Neuro-Economists: Why Do Investors Do What They Do? – New York Times

A brief overview of the major researchers and research in neuroecon today.

I liked this part:

Are phrases like “nucleus accumbens” — referring to a subcortical nucleus of the brain associated with reward — welcome in a profession caught up in interest rates and money supply? Skeptics question whether neuro-economics explains real-world phenomena.

Forest for the trees?

On Making the Right Choice: The Deliberation-Without-Attention Effect — Dijksterhuis et al. 311 (5763): 1005 — Science

I don’t know quite what to make of this. In fact, I just don’t understand what is going on. But I can definitely think of examples from my own life where this is true. Sometimes not thinking about a problem really does lead to its solution and it’s fascinating to think about why this may be.

Also, the authors draw a connection between what they call unconscious thought (as performed in their experiments) and insights that can come “after sleeping on it”; I’m not sure these phenomena are the same. I think sleep taps into deeper organization processes that are not available on the timescale of unconscious thought, as given in the experiment.

Abstract:

Contrary to conventional wisdom, it is not always advantageous to engage in thorough conscious deliberation before choosing. On the basis of recent insights into the characteristics of conscious and unconscious thought, we tested the hypothesis that simple choices (such as between different towels or different sets of oven mitts) indeed produce better results after conscious thought, but that choices in complex matters (such as between different houses or different cars) should be left to unconscious thought. Named the “deliberation-without-attention” hypothesis, it was confirmed in four studies on consumer choice, both in the laboratory as well as among actual shoppers, that purchases of complex products were viewed more favorably when decisions had been made in the absence of attentive deliberation.