The Psychology of Everyday Life: Motivation and the Search For Happiness

The Psychology of Money

How has evolution shaped our evaluation of risk and reward?

In order to survive, an animal needs to be highly attuned to both risk and reward. Examples of reward include food, sex, and social status; examples of risk include danger from predators, within-species aggression, and loss of resources. Our emotional life evolved as a means for us to quickly and efficiently recognize and respond to cues in the environment that are relevant to our survival. Our core emotions—such as desire, happiness, sadness, fear, and anger —help us process information about risk and reward. Because emotions and the parts of the brain that mediate them are relatively old on an evolutionary scale, we share many of our core emotions with other mammals, such as primates, cats, and dogs.

Anyone who has studied the stock market realizes that investors behave emotionally more than logically. Humans instinctively try to react quickly to potential risks, which tends to put logic second after gut reactions (iStock).

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