"Expert" But Bad Financial Advice Turns Off Decision-Making in the Brain

By Rachel Cernansky | March 26, 2009 3:37 pm

wallstreet.jpgWhen people are given “expert” financial advice, the decision-making parts of the brain shut down, a small new study has found. Brain scans of 24 volunteers showed that claims of expertise were found to suppress activity in the neural circuit linked to decision-making [Telegraph]. “It’s almost as if the brain stops trying to make a decision on its own” [CNN], said lead researcher Gregory Berns.

In the study, college students connected to MRI scanners were asked to choose between taking a guaranteed payment and gambling for a higher payoff. Some made the decision on their own, while others were given written advice that they were told came from an economist who counsels the U.S. Federal Reserve. The advice was intentionally poor, and urged students to accept the guaranteed small payments rather than gamble with good odds for a much higher return. When thinking for themselves, students showed activity in their anterior cingulate cortex and dorsolateral prefrontal cortex — brain regions associated with making decisions and calculating probabilities. When given advice from [the economist], activity in those regions flat lined [Wired]. The students who received the advice tended to follow it.

Says Berns: “Normally, the human brain uses a specific set of regions to figure out the trade-offs between risk and reward, but when an ‘expert’ offers advice on how to make these decisions, we found that activity in these regions decreases” [CNN]. It’s generally assumed that the brain integrates advice with its own information before making a decision. But “if that were true, we’d have seen activity in regions that track decisions. But what we found is that when someone receives advice, those relationships went away” [Wired], said Berns, whose study is published in the journal PLoS ONE.

The results reflect our natural tendency to defer to experts, that Berns argues is a product of our evolution as social animals  [CNN]—a conclusion that may contradict, with no explanation for the discrepancy, another recent study which found that people do not take advice from others, despite even strangers’ ability to predict how a person will react to new experiences more accurately than the person himself.

While Berns has not claimed that the findings can explain the entirety of the world’s current financial crisis, he does feel that banking chiefs need their heads examined. “Frankly, we should have everyone in the finance industry submit to brain scans” [CNN].

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Image: Flickr / knightmare6

CATEGORIZED UNDER: Mind & Brain
  • rRootagea

    if you believe yourself to be an expert, then you’ll find yourself using more heurestics and pattern recognition but with an excess of self-confidence?

  • Ergo Sum

    Investers need to realize how poor the so called experts are! Virtually none do better than the index funds which automatically follow the stock index.

  • Bill Levistein

    i am an expert, so if i tell myself advice, then does my brain shut off too?

  • Christina Viering

    I can relate.

  • Brian

    Perhaps the problem (between the 2 studies) is the participants acceptance of the “expert”?

    In Berns’ study, the advice was clearly labelled as coming from an economics expert. In Gilbert’s study the advice was merely coming from a source with that prior experience. There was no prestige title or respect paid to the source person in other words.

    In that kind of situation, I know I’d think, “well, that’s just another opinion from an ordinary person like me”. In other words it’s a source that’s a peer to me. That makes my opinion as valid as theirs and maybe more so (because I know me and they don’t).

    I understand that the study is taking issue with that logic, but that’s how I’d think of it.

  • Rob

    I’d like to see if people or at least some percent of people shut off their brains when “expert” politicians, reporters, or teachers present information and advice.

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