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Neuropsychologia. 2011 Jul;49(9):2533-40. doi: 10.1016/j.neuropsychologia.2011.04.034. Epub 2011 May 11.

Market mechanisms protect the vulnerable brain.

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1
Department of Neurology, UIHC 200 Hawkins Drive, Iowa City, IA 52242, USA. kanchna-ramchandran@uiowa.edu

Abstract

Markets are mechanisms of social exchange, intended to facilitate trading. However, the question remains as to whether markets would help or hurt individuals with decision-makings deficits, as is frequently encountered in the case of cognitive aging. Essential for predicting future gains and losses in monetary and social domains, the striatal nuclei in the brain undergo structural, neurochemical, and functional decline with age. We correlated the efficacy of market mechanisms with dorsal striatal decline in an aging population, by using market based trading in the context of the 2008 U.S. Presidential Elections (primary cycle). Impaired decision-makers displayed higher prediction error (difference between their prediction and actual outcome). Lower in vivo caudate volume was also associated with higher prediction error. Importantly, market-based trading protected older adults with lower caudate volume to a greater extent from their own poorly calibrated predictions. Counterintuitive to the traditional public perception of the market as a fickle, risky proposition where vulnerable traders are most surely to be burned, we suggest that market-based mechanisms protect individuals with brain-based decision-making vulnerabilities.

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