Losing money hurts!

Humans have been using money for 7000 years, maxiumum, but their brains have been evolving for far longer than that. So how do we handle money, biologically speaking? And how can this be connected to gambling? This article from MIT’s Technology Review says how:

According to new research by Mauricio Delgado, a neuroscientist at Rutgers University, our brains interpret losing money the same way they interpret pain. Delgado and his collaborators used functional magnetic resonance imaging, a technique that indirectly measures brain activity, to watch the brains of volunteers as they played a gambling game that resulted in either money loss or a painful shock. Volunteers rated both experiences as equally unpleasant, and in both cases, a part of the brain known as the striatum, which is involved in picking out the most rewarding objects or actions in our environment, became active. “Perhaps the way we learn about losing money is similar to how we learn to avoid shock,” says Delgado, who presented the research this week at the Society for Neurosciences conference in Atlanta. According to Read Montague, a neuroscientist at Baylor University who also studies neuro-economics but was not involved in the current research, the findings show that older brain structures shared by all animals–not all of which deal with currency, obviously–can be used to make decisions about abstract symbols, such as money.

A second study found that certain gamblers release dopamine–a brain chemical linked to pleasurable sensations, such as food and sex or taking drugs–when gambling. Arne Moller, a neuroscientist at Aarhus University Hospital, in Denmark, used positron emission tomography (PET) to image dopamine concentrations in the brains of pathological gamblers as they played a gambling game. The findings could eventually help design specialized treatments for gamblers. “Gambling is like a parasite that learns to grow in our liver,” says Montague. “It’s a totally irrational behavior that takes advantage of the frailty of our decision-making systems.”

Technology Review: How does the brain learn about money?

I’ve got to take issue with the contention that “gambling is like a parasite that grows in our liver.” The basic human impulse to face risk is not irrational. If it was, humanity about have died out millennia ago, because the mere act of surviving entails risk.

Gambling is a way of compressing that risk into small, discrete, socially acceptable packets. You put your money down, spin the wheel, and hope for the best.

When done in moderation, there is nothing irrational about this. Most people get more enjoyment out of staking $20 on roulette than letting the $20 sit in the back and collect interest: you have an immediate payoff, and you should be able to handle losing $20. Though you’ve got to face a 5.3% house edge, you’ve got a decent chance of winning (on a straight-up even money wager, that is), so the risk is in line with the reward.

Spending one dollar on the lottery, where the odds are greater but the exposure less, is also rational, if you get enjoyment from playing.

The irrational part comes in when pathological gamblers (the group that Montague is studying) place bets whose payoff is out of line with the risks. Would you bet everything you own on an even money proposition, even if you had a 60% chance to win? Mathematically, it might be the right thing to do, but you simply have too much to lose. It is therefore not rational to wager everything you own, or to chase your losses.

So while Montague is correct, in the narrow sense, he’s painting gambling with too broad a brush. Most people are able to balance risk and reward, and can gamble responsibly. It is the few who can’t do so who act irrationally. But is that because of something inherent in gambling, or within the individual? Most behaviorists would say the latter.

It’s like saying that there is something inherently pathological about food because some people make a few trips too many to the buffet and become morbidly obese.

One of the things that sets Roll the Bones apart from 99% of the stuff that’s out there about gambling is that, like my other work, it was written from the viewpoint of someone who thinks that people who gamble and people who run gambling operations are basically rational, intelligent people (at least to the extent that the broader population is). It’s hard too believe how controversial that stance is in some circles. Growing up in Atlantic City and living in Las Vegas, it seems obvious, so it’s hard for me to understand how people, in this day and age, could seriously believe otherwise.

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