Economics, Literature and Scepticism

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I am a PhD student in Economics. I am originally from South Africa and plan to return there after my PhD. I completed my M. Comm in Economics and my MA In Creative Writing (Poetry) at the University of Cape Town, where I worked as a lecturer before starting my PhD.

Monday, June 28, 2010

Eat and Behave Risk Aversely

Posted by Simon Halliday | Monday, June 28, 2010 | Category: , , , |

http://fatherstephen.files.wordpress.com/2008/07/gluttony.jpgBPS research digest has a great little summary of an article investigating the role of hunger in risk-taking.  The article speculates on the results it observed about eating and risk-taking on the theory of behaviour of obese individuals and individuals on diets. The general result was that people who are hungry are likely to take more risks and that this is exacerbated by 'baseline adiposity', that is, how much adipose tissue an individual has, or how 'fat' they are.

Consequently, what concerns me is the eating behaviour of individuals in financial institutions.  Let's say that people on Wall Street or who work in finance often don't eat in order to 'continue working' (trust me, I hear enough horror stories from friends), then these people go about deciding on the risk portfolios of their customers.  They claim that they do this in an objective and unaffected way, but if hunger affects their decisions to take risks, then maybe their employers should consider enforced eating (I know that many companies subsidise food or provide it directly to their workers).   Extending this logic, it would be reasonable to prefer that your stock broker had regular and healthy meals than working overtime to get in that last moment of work effort and staving off their meal.  Also, if we're worried about obese individuals and dieting individuals, then I'd also rather not have an obese stock broker.  A question results, might a study such as this result in statistical discrimination against obese brokers because they're more likely to take risks when hungry?

[Please note, I'm not advocating discrimination here, I'm simply trying to spell out the ways in which people might interpret the results, I really wouldn't be surprised to see a headline in a few days saying 'Slim bankers take fewer risks' or something similar.]

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