Some biologists think that hormone "imbalances" may contribute to "ultra-aggressive" traders, and therefore the financial crisis.

Successful stock traders may be physically prone to hormonal excess — a physiology that leads to success on fast-paced trading floors, but also to a global economy steered by hormonally imbalanced decision makers.

In a study of 44 London traders, the most successful tended to have longer ring fingers than index fingers, a ratio linked to high prenatal exposures to androgen, a male sex hormone. This exposure in turn is believed to increase adult testosterone levels.

By favoring ultra-aggressive hotheads, the financial world may be throwing a human-sized wrench in its own gears. ...

A variety of traits — from sexual preference and athletic aptitude to assertiveness and aggression — have been correlated with ring-to-index finger ratio. Some of these studies have not been replicated, and have been criticized as a modern form of phrenology. But researchers do agree that the ratio tracks with prenatal androgen exposure. This early exposure is believed to determine testosterone levels during adulthood, carving a metabolic channel down which hormones can flow — and flow they do on trading room floors, where fortunes can be made and lost in minutes.

I'm not sure about the ring finger connection, but I can see how our financial system rewards aggressive risk-takers. One obvious example is that corporate executives can get huge bonuses in good years that they don't have to give back in bad years. Similarly, fund managers take a cut of the profits in good years but lose little in bad years.

(HT: NW.)

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