Select your localized edition:

Close ×

More Ways to Connect

Discover one of our 28 local entrepreneurial communities »

Be the first to know as we launch in new countries and markets around the globe.

Interested in bringing MIT Technology Review to your local market?

MIT Technology ReviewMIT Technology Review - logo

 

Unsupported browser: Your browser does not meet modern web standards. See how it scores »

The common perception is that older people are more conservative investors than their younger counterparts. But brain imaging studies combined with economic analysis are causing neuroscientists to question that idea. Recent research suggests that sometimes older people make riskier and less logical investment decisions than younger people, and that specific changes in the brain associated with aging may underlie those decisions.

A better understanding of these changes could help scientists figure out what forms of information are most useful to older people seeking to make sound financial decisions—an issue that could soon have a greater social impact than ever before.

“Huge demographic changes are taking place all over the world,” says Gregory Samanez Larkin, a postdoctoral researcher at Vanderbilt University and codirector of the Scientific Research Network on Decision Neuroscience and Aging, a multidisciplinary, multi-center effort funded by the National Institute on Aging. “Very soon there will be a much larger percentage of people over age 65, and that has economic implications.” Financial regulatory agencies are interested in the research, says Larkin, and are funding neuroscientists as they seek ways to help older people make better investment decisions.

“The natural idea is that older people are more risk-averse, but they are not uniformly more risk-averse. In some cases, they are more risk-seeking,” says Scott Huettel, codirector of the Center for Neuroeconomic Studies at Duke University.

Economic literature over the last five to 10 years suggests that older people’s investments on average tend to perform poorly relative to the risk they are taking on. “They don’t make as good decisions and don’t use the information as well,” says Huettel.

Larkin, Huettel, and others are combining brain imaging and traditional economic theory to understand the physiological changes responsible for these trends. The brain tends to shrink with age, and certain cognitive functions, such as working memory—the ability to hold information in the brain for a short time—decline. “But we are learning that is just a part of making financial decisions, and it may not even be the deciding factor,” says Brian Knutson, assistant professor of psychology and neuroscience at Stanford University.

In an experiment published earlier this year, Knutson and Larken asked people of varying ages to pick stocks while lying in a magnetic resonance brain scanner. Participants got feedback on the stocks’ performance throughout the task. The researchers knew from previous research that a certain part of the brain called the nucleus accumbens is more active when people anticipate making money or taking a financial risk. Another part is more active when they anticipate losing money or avoiding a risk.

Gain the insight you need on economics at EmTech MIT.

Register today

4 comments. Share your thoughts »

Credit: Gregory Samanez-Larkin

Tagged: Biomedicine, brain, aging, economics, neuroeconomics

Reprints and Permissions | Send feedback to the editor

From the Archives

Close

Introducing MIT Technology Review Insider.

Already a Magazine subscriber?

You're automatically an Insider. It's easy to activate or upgrade your account.

Activate Your Account

Become an Insider

It's the new way to subscribe. Get even more of the tech news, research, and discoveries you crave.

Sign Up

Learn More

Find out why MIT Technology Review Insider is for you and explore your options.

Show Me
×

A Place of Inspiration

Understand the technologies that are changing business and driving the new global economy.

September 23-25, 2014
Register »