Brain Damage = Better Forecasting?


HedgeFundGuy has an interesting post up about why experts don't often exhibit extraordinary skill at forecasting.

All well and good, but in an appeal to Occam's Razor, perhaps this simpler explanation is the better one?

A team of U.S. scientists has found the emotionally impaired are more willing to gamble for high stakes and that people with brain damage may make good financial decisions, the Times newspaper reported Monday.

In a study of investors' behavior 41 people with normal IQs were asked to play a simple investment game. Fifteen of the group had suffered lesions on the areas of the brain that affect emotions.

The result was those with brain damage outperformed those without.

Perhaps if people can be rational in the grips of a drug addiction -- to note the work of a newly-minted Genius* (almost unrecognizable in that picture, give the lack of what I thought to be the ever-present ballcap) -- then they can be just as rational in the face of brain damage. Indeed, it may be a common occurance:

Fellow [study] author, Baba Shiv of Stanford Graduate School of Business said many company chiefs and top lawyers may also show they share the same trait.

* I note that MR has a post on Kevin Murphy as well, with appropriate links. Tyler Cowen is right to mention the appellation "genius" is deserved even without John D. and Catherine T. say-so. Attending the University of Chicago without, at the very least, sitting in on some of his classes would be a downright shame. Even more rewarding are those days when someone in the audience takes it in their mind to challenge Dr. Murphy on a topic he or she is just learning. The resulting exchange is entertaining, though one must enjoy a bit of shadenfreude for the unfortunate student.


This would seem to suggest that perhaps "normal" people are excessively risk averse, which may help explain why stocks have tended to outperform bonds in the past century.

A "study" with only 41 participants is not worth the paper it is printed on. The results are not statistically meaningful.

I'm not an expert on design of experiments, but the fact that 15 out of 41 had brain lessions sounds suspicious. How do you randomize something like that?


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