Featured Research

from universities, journals, and other organizations

Why do people 'play the longshot' but buy insurance? It's in our genes

Date:
January 13, 2010
Source:
The Hebrew University of Jerusalem
Summary:
Why do some people like to take risks by playing "longshot" payoffs while, on the other hand, taking the opposite tack by buying insurance to reduce risks? A team of economists and molecular geneticists says the answer can be found in our genetic makeup.

New research by economists and molecular geneticists helps answer why people tend to be risk-preferring when facing longshot risks involving significant gains, such as playing the lottery.
Credit: iStockphoto/Steve Snowden

Why do some people like to take risks by playing "longshot" payoffs while, on the other hand, taking the opposite tack by buying insurance to reduce risks? A team of economists and molecular geneticists from the Hebrew University of Jerusalem and two Asian universities says the answer can be found in our genetic makeup.

Related Articles


The team set out to tackle the long-standing question in economic theory as to why people tend to be risk-preferring when facing longshot risks involving significant gains, such as betting on race horses, and on the other hand are risk averse when facing significant losses -- buying home or car insurance, for instance.

Many economists have struggled with this paradox, says Richard Ebstein, the Sylvia Scheinfeld Professor of Human Genetics at the Hebrew University of Jerusalem, who has probed this subject along with economists Prof. Soo Hong Chew of the National University of Singapore (NUS) and Dr. Songfa Zhong of NUS and the Hong Kong University of Science and Technology.

Ebstein notes the psychological explanation suggested by former Hebrew University psychology Professors Daniel Kahneman (a Nobel Prize laureate) and Amos Tversky, as embodied in their widely accepted prospect theory, to explain why people play the lottery and at the same time purchase insurance. Although prospect theory offers a psychological explanation for this facet of economic behavior, the underlying neurobiological and neurogenetic mechanisms have remained obscure until now, said Ebstein.

In an article just published online on PLoS ONE, Ebstein and his colleagues combined the tools of experimental economics and molecular genetics to examine the role of a well-characterized gene, monoamine oxidase A (MAOA), in predicting whether subjects are more likely to buy the lottery or insurance (or both) under well-controlled laboratory conditions.

In the experiment, 350 Han Chinese subjects were recruited in Beijing and participated in two simple choice tasks, representing proclivities to purchase lottery tickets and insurance, using real monetary incentives.

For example, the subjects were given options to keep a very small cash return upfront, with no risk, or of gambling bigger amounts that they were given upfront but with a minimal chance of actually winning and keeping the money in a lottery drawing. In the second task, concerning insurance, subjects were asked whether or not they would insure a certain but insignificant loss or would take out insurance on a larger amount with a real but low risk of actual loss.

They found that subjects with a high-activity variation of the MAOA gene are characterized by a preference for the longshot lottery and also less insurance purchasing than subjects with the low-activity genetic version. This is the first result to link attitude towards longshot risks to a specific gene. It complements other, recent findings on the neurobiological basis of economic risk taking.

As the world financial system slowly emerges from the near economic meltdown, it is worth considering, says Ebstein, that inborn biases, coded by common genetic variants, may be a major factor in fueling people's actions regarding longshot options --- with concomitant effects on financial markets.


Story Source:

The above story is based on materials provided by The Hebrew University of Jerusalem. Note: Materials may be edited for content and length.


Journal Reference:

  1. Songfa Zhong, Salomon Israel, Hong Xue, Richard P. Ebstein, Soo Hong Chew. Monoamine Oxidase A Gene (MAOA) Associated with Attitude Towards Longshot Risks. PLoS ONE, 2009; 4 (12): e8516 DOI: 10.1371/journal.pone.0008516

Cite This Page:

The Hebrew University of Jerusalem. "Why do people 'play the longshot' but buy insurance? It's in our genes." ScienceDaily. ScienceDaily, 13 January 2010. <www.sciencedaily.com/releases/2010/01/100111102532.htm>.
The Hebrew University of Jerusalem. (2010, January 13). Why do people 'play the longshot' but buy insurance? It's in our genes. ScienceDaily. Retrieved March 1, 2015 from www.sciencedaily.com/releases/2010/01/100111102532.htm
The Hebrew University of Jerusalem. "Why do people 'play the longshot' but buy insurance? It's in our genes." ScienceDaily. www.sciencedaily.com/releases/2010/01/100111102532.htm (accessed March 1, 2015).

Share This


More From ScienceDaily



More Mind & Brain News

Sunday, March 1, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

The Best Foods to Battle Stress

The Best Foods to Battle Stress

Buzz60 (Feb. 26, 2015) If you&apos;re dealing with anxiety, there are a few foods that can help. Krystin Goodwin (@krystingoodwin) has the best foods to tame stress. Video provided by Buzz60
Powered by NewsLook.com
Sleeping Too Much Or Too Little Might Increase Stroke Risk

Sleeping Too Much Or Too Little Might Increase Stroke Risk

Newsy (Feb. 26, 2015) People who sleep more than eight hours per night are 45 percent more likely to have a stroke, according to a University of Cambridge study. Video provided by Newsy
Powered by NewsLook.com
Mayor Says District of Columbia to Go Ahead With Pot Legalization

Mayor Says District of Columbia to Go Ahead With Pot Legalization

Reuters - News Video Online (Feb. 25, 2015) Washington&apos;s mayor says the District of Columbia will move forward with marijuana legalization, despite pushback from Congress. Rough Cut (no reporter narration). Video provided by Reuters
Powered by NewsLook.com
Marijuana Nowhere Near As Deadly As Alcohol: Study

Marijuana Nowhere Near As Deadly As Alcohol: Study

Newsy (Feb. 25, 2015) A new study says marijuana is about 114 times less deadly than alcohol. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Health & Medicine

Mind & Brain

Living & Well

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins