I’m about halfway through an excellent new book from Steven Levitt and Stephen Dubner, SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance. The book is fantastic.

From the Introduction:

Many of life’s decisions are hard. . . . For one, the stakes are high. There’s also a great deal of uncertainty involved. Above all, decisions like these are rare, which means you don’t get much practice making them.

What I love about this book, and the earlier book, Freakonomics, is that statistics are used to show the disparity between what appears to be true and what we believe to be true. The theme of both books is:

People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws in the universe is the law of unintended consequences.

The book is written in an extremely approachable manner. The stories are entertaining and thought provoking.

I was lucky enough to hear Stephen Dubner speak at a conference about 2 years ago. In the speech, he told a riveting story about capuchin monkeys. It is a story I love to retell. I was excited to see that this has been included in the new book. It is worth the price of the whole book.

The story revolves around a researcher who asks the question: “What would happen if I could teach a bunch of monkeys to use money?” The monkeys were taught to exchange a one-inch silver disc with a hole in the middle for treats (jello, apples, and later grapes). Whenever the “coin” was exchanged, the monkey would get a treat. The monkeys learned this trick.

Next, the monkeys learned to “buy” their preferred treat when presented with multiple options. Different monkeys showed preferences for different treats.

Price shocks were then introduced. All of a sudden, the coins starting “buying” more or less treats than previously, two cubes of jello instead of three. When their favorite treat became more expensive, the monkeys reduced the amount they purchased. They increased the amount they bought when the prices fell. Monkeys respond to discounts – it’s amazing.

Image Credit: NaturalLight

The experiment was changed to test irrational behavior. Two gambling experiments were set up, both resulting in the monkeys getting the same amount of grapes. In one situation, the monkey would see one grape, but based on a coin flip could get a second grape. In the other situation, the monkey would see two grapes, but based on a coin flip could lose one of the grapes.

The monkeys demonstrated “loss aversion”. They preferred the opportunity to win an extra grape versus the risk of losing a grape. Rational behavior would show no preference. The monkeys acted like people.

One day, a monkey went into the testing room and instead of exchanging the coins for treats, he grabbed all the coins and threw them into the communal cage and then ran out of the testing chamber after the coins – perhaps, the first monkey bank robbery!!

The researchers couldn’t get the coins back from the monkeys as the monkeys had learned they had value. The researchers needed to bribe the monkeys to get the coins back, exchanging treats for the coins. Aha, the monkeys learned that crime pays!!

One of the monkeys gave his stolen coin to a female monkey instead of exchanging the coin for food.

After a few seconds of grooming – bam! – the two capuchins were having sex.

What Chen [the researcher] had seen wasn’t altruism at all, but rather the first instance of monkey prostitution in the recorded history of science.

And then, just to prove how thoroughly the monkeys had assimilated the concept of money, as soon as the sex was over . . . the capuchin who’d received the coin promptly brought it over to Chen to purchase some grapes.

The book is filled with these kind of stories. It is a fantastic read. As someone who works to help people make better decisions based on quantitative data, it is phenomenal insight into how people think and make decisions. I couldn’t recommend this book more.

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