Why Losing Money May Be More Painful Than You Think

"Many everyday financial decisions, such as playing the lottery or investing money are gambles in some form or another, and most of these gambles involve the chances of both gaining and losing money," says Dr Ben Seymour from the Wellcome Trust Centre for Neuroimaging at UCL (University College London), who led the study. "Although we already know an impressive amount about how the brain learns to predict financial gains, until now, we have known little about how we deal with losing money."

The researchers studied twenty four healthy subjects as they played a gambling game to win money and recorded the activity in the brain throughout the game using an fMRI brain scanner to look for subtle changes in brain activity. They found that the subjects were accurately learning to predict when there was a chance of winning or losing money, and that this learning appeared to occur in a region located deep within the brain, called the striatum.

Being able to make predictions about rewards and punishments is important, since it allows us to take appropriate action early to avoid punishments or to benefit from rewards. This ability is guided by a "prediction error", whereby the brain learns to make predictions based on previous mistakes .The researchers have shown that there appears to be a separate response when the prediction results in a financial loss, as opposed to financial gains,.

The researchers found surprising similarities between the response to financial losses and a system that they had previously identified for responding to pain, which they believe allows the brain to predict imminent harm and allow immediate defensive action to be taken.

"Clearly, none of us want to lose money in the same way that none of us want to experience pain," says Dr Seymour. "It would make sense that the way that we learn to predict and hence avoid both of them should be linked."

The reward and defensive systems relating to financial loss were very similar to motivational systems previously identified in rats, which suggests they have hijacked an evolutionarily old system connected to avoiding fear and pain.

"This provides a sort of biological justification for the popular concept of 'financial pain'," says Dr Seymour.

Understanding how the brain systems for learning to predict financial losses and gains interact may provide important insights into why some people gamble more than others, and why some become addicted to it, Dr Seymour added.