A study of the phenomenon known as loss aversion in two patients with lesions to the amygdala, a region deep within the brain involved in emotions and decision-making, may help explain how we make decisions and what makes us dislike the thought of losing money.

 Loss aversion describes the avoidance of choices which can lead to losses, even when accompanied by equal or much larger gains . Examples in the everyday life include how we make a decision on whether to proceed with an operation: the more serious the potential complications from the operation – even if the risk is low compared to the chances of success – the less likely we would be to proceed.

Published in PNAS, the new study explored whether the two patients affected by lesions to the amygdala were capable of perceiving, recognizing or feeling fear. Each patient – together with twelve 'healthy' controls – took part in a task designed to test whether the chance of losing money affected people's likelihood to gamble

At the beginning of the experiment, each participant was given $50 with which to gamble on the outcome of flipping a coin, which carries a 50:50 chance of winning (or losing). However, each time, the amount that the volunteers could win or lose varied. For example, one time they might stand to win $50 or lose $20 depending on the outcome. The second time, they might stand to win $30 or lose $40.

The researchers found that, as expected, the healthy individuals were less likely to gamble when the difference between the potential winnings and potential losses was smaller – for example, whilst they might gamble if they stood to win $50 but lose only $10, they would be less likely to gamble if they stood to win only $20 but lose $15. When the potential losses outweighed the potential gains, the controls would not gamble.

However, the two patients with impaired amygdala activity were much less affected by the disparity between potential gains and losses; occasionally, even when the potential losses outweighed the potential gains they would choose to gamble, showing a lack of loss aversion.

"A fully-functioning amygdala appears to make us more cautious," explains co-author Ralph Adolphs. "We already know that the amygdala is involved in processing fear, and it also appears to make us 'afraid' to risk losing money."

"It may be that the amygdala controls a very general biological mechanism for inhibiting risky behavior when outcomes are potentially negative, such as the monetary loss aversion which shapes our everyday financial decisions," comments Dr De Martino, a visiting researcher from UCL (University College London).

"Loss aversion has been observed in many economic studies, from monkeys trading tokens for food to people on high-stakes game shows," adds co-author Colin Camerer, "but this is the first clear evidence of a special brain structure which is responsible for fear of those losses."

The research team also investigated whether, as well as being 'loss averse', the patients were also 'risk averse'. Risk aversion and loss aversion are two similar, but not identical, processes and as such can be easily confused. People who are 'risk averse' are less likely to take chances even when they do not stand to lose anything.

The volunteers were again asked to make a decision based on the outcome of a coin toss. However, in this situation, the options were either to take a set amount without gambling (for example, $5), or gamble with a chance of winning $10 or receiving nothing. In this experiment, both patients and controls showed little difference in their decisions, suggesting that the amygdala goes not control this aspect of risk taking.

Citation: Benedetto De Martinoa, Colin F. Camerera, Ralph Adolphs, 'Amygdala damage eliminates monetary loss aversion', PNAS, February 2010; doi:10.1073/pnas.0910230107