The purpose of this is to determine whether irrational behavioural patterns in humans that are exhibited when making economic decisions revert to our evolutionary ancestors. While classical economics assumes rationality in economic decision-making, in reality, people are often irrational. But this irrationality occurs in ways that are consistent and specific. The field of behavioural economics analyses such predictable patterns of irrationality.
In 2005, two scholars at Yale – behavioural economist Keith Chen and psychologist Laurie Santos – began conducting a few experiments, to observe how capuchin monkeys use their money when they’re given simple economic choices.
The monkey money design was simple – a silver token, with a hole in its centre. The capuchins were trained to understand that the money could be traded for food. They learned that they could hand over their tokens to the experimenters, in exchange for grapes, Jell-O or slices of apple.
Then, the experimentation began by looking at how they changed their behaviour due to changing market dynamics. It turns out that capuchins behave rationally in response to price shocks. When one type of food becomes cheaper, they buy more of it. When it becomes more expensive, they buy less.
However, they also behaved irrationally in response to other types of decisions. In one of the experiments, a different choice was offered. One experimenter displayed two slices of apple, but removed one every time a trade took place, thereby offering the capuchin only one slice. The other experimenter only displayed one slice of apple, and always gave the capuchin exactly what was advertised: a slice of apple.
Since the pay-off was the same, classical economics would deem the capuchins should trade equally with both experimenters.
But this did not happen – the monkeys strongly preferred trading with the experimenter who gave them what was advertised. This is precisely what humans do, in this type of situation. It has been labelled ‘loss aversion’ – or the tendency for humans (and capuchin monkeys) to strongly prefer avoiding losses, over acquiring gains.
In humans, studies have shown that this aversion causes people to behave in more risky and irrational ways, when facing a potential loss. It turns out that both humans and monkeys are willing to take a risk, when it comes to losses – so when the value of shares, a house or other asset depreciates, instead of choosing to cut our losses, we often risk holding onto the asset, in case its value rebounds.
In fact, researcher Keith Chen has noted that the data generated by the capuchin experiments is “statistically indistinguishable from stock market investors.”
Beyond that, it also appears as though monkeys understand the very concept of money – i.e. as something that acts as a store of value and medium of exchange.
This became shockingly apparent during an unscheduled occurrence. During the course of one experiment, a capuchin grabbed the tray containing money and threw it into the common area. When experimenters were working to contain the situation and reclaim the tokens, an unexpected behaviour was observed between two capuchins.
Amidst this confusion, the experimenters noticed that one monkey had paid a token to another monkey, in exchange for sex. The monkey who was paid promptly spent the money, to buy a grape. The introduction of money into a monkey society had thus spawned the existence of prostitution.
Perhaps, this is a hint that prostitution – fabled to be ‘the oldest profession’ – may be as old as money.
On a deeper level, perhaps these studies hint at a darker side of primates – a side that is greedy, selfish and easily exaggerated by the very usage of money itself. Because it allows us to store wealth in a way that it can be hoarded or stolen, money often encourages bad behaviour. Once the capuchin monkeys learned of the power of their tokens, they often went out of their way to steal them.
During a more recent study undertaken by Laurie Santos, in collaboration with two Harvard scholars, another fascinating behaviour was discovered. Given the opportunity, capuchin monkeys were found to punish other monkeys who benefitted from inequality… by using an experimental mechanism that collapsed a table and dropped the food out of reach. This is in line with similar experiments on human subjects, vis-à-vis punishing inequality.
But unlike with humans, the capuchins were indifferent to whether the benefactor of the inequality had done anything to cause inequality, or if chance simply benefitted them. Regardless of how the inequality arose, the monkeys punished it.
While we’re far more intelligent than monkeys in many ways, we continue to make mistakes and engage in primitive behaviour, when it comes to money and markets. The truth is, our human minds are not inherently rational decision-making machines; and free, unregulated markets can be detrimental to all primates – humans included.
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