Are economic crises the result of poorly thought out financial institutional design, or are they the natural consequence of having the kinds of minds we have? To try to get to the bottom of this question, psychologist Laurie Santos and economist Keith Chen have been studying capuchin monkeys in their Yale lab.The idea is to try to understand how a bunch of monkeys with no training in economics (or even language) respond to different scenarios, and then compare the results to those obtained from human subjects.
The results, surprise surprise, reveal that monkeys mirror human irrationality almost perfectly, probably because both species base their decisions on two main cognitive biases: relative evaluation and loss aversion.
Laurie Santos explains these fascinating findings in the following TEDTalk presentation:
For a bit more on this research, check out this nice article from the Freakonomics folks.
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