Thursday, December 29, 2005

Intelligent Decision-Making: Finding the Golden Mean

In a study of two types of risk-related errors (too much vs. too little risk), researchers found that they could predict the type of financial risk errors that subjects made, depending on what brain areas became active. The medial prefrontal cortex and nucleus accumbens became active before people made risky choices in a financial investment 'game', whereas the anterior insula seem to precede risk-averse mistakes.

This sounds like Confucius' Golden Mean: "To go beyond is as wrong as to fall short."

Understanding these two extremes of risk may help us to be better decision makers. We hear about unnecessary risk and risky behaviors a lot, but risk aversion may be even more common. In research studies, risk aversion seems to be more common among women than men, and has been implicated in the wage gap, underachievement, and even classroom underperformance in mathematics teaching (see bottom link).

The picture below is the look of "Too much risk".

Two Types of Financial Risk and fMRI
Risk Aversion and the Wage Gap
Risk-Seeking and Aversion Among Pre-Service Teachers - Mathematics

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