It was only a matter of time before pop-news outlets pounced on a biological explanation for the tidal wave of bad credit and risky decisions that has engulfed the U.S. this month: it was those dang men and their raging hormones!
The source of this meme is a just-published study in Evolution and Human Behavior in which ninety-eight young men—most of them Harvard students—were given $250 to either save or “invest” in a game of chance. The ones who took the most risk, the researchers found, were the ones with the highest levels of testosterone in their saliva. Risk-takers also had more masculine facial features, perhaps because square jaws and bigger cranial bones are thought to be a proxy for testosterone exposure during puberty.
I recently spoke to the lead co-authors of the paper, Coren Apicella of Harvard and Anna Dreber of Harvard and the Stockholm School of Economics, to ask about what sex hormones have to do with risk-taking in the first place, and whether skyrocketing testosterone really had an impact on world financial markets.
I've seen a bunch of headlines today and yesterday saying things like "Testosterone caused the financial crisis!" What, if any, connections would you draw here?
Apicella: Anna is the economist, so she could probably give you a little more insight on this market crisis, but I would say that’s media spin on the results that we found. But Herbert and Coates, two British researchers, published a study in May and made some interesting findings: male London traders on the floor actually made higher profits on days that their testosterone levels were above their median for the week.
Dreber: In today’s business environment, investment banks select for extremely risk-taking individuals. I'm sure that these men have higher testosterone levels. How much did this actually contribute to the crisis? We don't know yet how much risk-taking in general contributed, but the insurance company AIG has more than 100,000 employees, and it was basically brought down by this small group of traders in London who were taking excessive risk there. They probably didn't have a good model of uncertainty, so in fact they were taking all this risk without even realizing it. It's likely that the guys over there had more testosterone than the average man.
Why might testosterone regulate risk preferences?
Apicella: In a wide range of behaviors and traits, men show more variation than women. For instance, hunting is a risky sort of strategy—you might get the kill, but you might come up with nothing. But if you do get something, you'll get quite a few calories. So these high-risk strategies could yield larger returns in terms of reproduction for men—they could have higher fitness payoff. A woman's fitness is limited to her access to resources and how many children she can have in a lifetime. Men's fitness is limited only by their access to different women, and one way for them to attract different women is by having a lot of resources—that is, money.single page
Five amazing, clean technologies that will set us free, in this month's energy-focused issue. Also: how to build a better bomb detector, the robotic toys that are raising your children, a human catapult, the world's smallest arcade, and much more.