CASH ON THE COUCH
A trust fund that gives a fillip to the feel-good factor
The good news is that a hormone secreted by the brain during sex can be a powerful economic growth engine
Oxytocin is a hormone that the brain secretes when the body feels good. Mothers show higher levels of oxytocin when they breast feed; it increases in men when they hug their children. Oxytocin rises during sexual orgasm.
So why does Paul Zak, an associated professor of economics at Claremont Graduate University, spend his days in a laboratory, drawing blood samples from student volunteers and looking for the hormone?
Because oxytocin also appears to be linked to trust. And trust, according to Zak, is a powerful economic growth engine.
Zak, who studied maths as an undergraduate before earning his PhD in economics, did not begin his career in a lab. His earlier research considered the effects of trust on a macroeconomic level.
He and Stephen Knack, at the World Bank, published a 2001 study that showed a strong correlation between a country’s economic growth rate and the level of trust among its citizens.
“You can think of trust as a lubricant,” Zak explains. “When I make an investment, I put something in today to get something in the future . . . If we can shake hands and do the deal, the transaction costs are low. But when trust is low, I need lots of lawyers and accountants involved, and at some point I may say it’s just not worth it.”
In countries such as Peru – where only 5 per cent of people trust their compatriots, according to a mid-1990’s survey – policy makers may be powerless to break out of the low trust “poverty trap”, the authors conclude.
Zak and Knack’s argument gets a bit complicated because it is slightly circular. Per capita income is one of the top four predictors of a country’s trust levels. (The others are social and economic homogeneity, strong legal institutions, and social rules that promote good behaviour.)
But when trust is high, the economy grows, further boosting income, they argue. A country that increases its trust levels by 15 percentage points will raise per capita output growth by 1 per cent a year, they estimate.
Now, Zak is examining how that virtuous cycle works in individual transactions, and that is where oxytocin comes in.
His research, conducted with colleagues at Claremont’s Center for Neuroeconomics Studies, begins with a behavioural finance experiment. One person is given $10, which he can keep for himself or pass on to an anonymous partner via a computer trade. If he passes, he triples the money, but there is no guarantee his partner will share it. Still, many test subjects do trust their partners, and most partners repay the favour. Zak’s variation on the test is to examine blood taken from his subjects after they make their decisions. “It’s interesting work for an economist: Blood clots, it’s messy . . . But if we want to understand economic decision-making we need to understand the brain,” he says.
Among the eight hormones that Zak considered, oxytocin was the most important. Partners who received money saw their levels of the hormone rise. And – perhaps more significantly – the ones with the highest oxytocin levels were willing to give back the most. Not only did being trusted spark oxytocin secretion, but extra oxytocin encouraged people to be trustworthy.
“We asked people ‘Why did you do it?’ and they didn’t know,” Zak says. “All of this happens in the brain outside your view. But it feels good when someone trusts you. In this very sterile environment, you’re getting that one piece of information, and it has a physiological effect.”
Zak’s macroeconomic research suggests that governments can increase trust levels by changing the environment in which their people live and transact – improving education, reducing income inequality. Enhancing freedoms and strengthening legal institutions.
Now he is investigating whether trust can be enhanced on the biological level with oxytocin. His next experiment involves injecting subjects with synthetic oxytocin, asking them to perform the same anonymous exchange of money, and tracking their brain activity.
If the study shows that oxytocin promotes trusting behavior, in addition to being generated by a trusting act, there are interesting implications. “I don’t think the answer is to go around giving people oxytocin injections,” Zak says. “But it would make us less risk-averse”, which could spark investment, jump-starting the economy.
Other ways to boost oxytocin include massages, warm baths and phytoestrogens, which are found in soyabeans, cabbage and broccoli. Interaction with children helps, too. But “the best way to raise oxytocin, short of giving birth, is having sex,” Zak says.
“If you want a flippant way of saying it: Sex is good for the economy.”