Authored by Nicholas Colas via DataTrekResearch.com,

We have been thinking a lot about human memory over the last few days. Part of that is some lingering thought about the 10-year Lehman bankruptcy anniversary earlier this month. Another is the fact that Monday will be the one-year mark for DataTrek publishing these notes. And, of course, the Supreme Court nomination hearings today put human memory in a starring role.

The science of memory shows this subject is much more complex than most of us realize. One classic example:

• Daniel Kahneman, who won a Nobel Prize for Prospect Theory, once did an experiment with subjects who were undergoing a colonoscopy.

• Some patients received the standard exam, which featured an especially painful part near the end of the procedure. This is one reason colonoscopies had a bad rap for so long.

• Others had their procedure altered so the last part was not so painful.

• The latter remembered the whole event as being much less painful than those where the last bits were especially difficult. Same procedure, but entirely different memories based on whether the last slice of time was easy or hard.

• As an aside, we’ve watched Kahneman’s TED talk more times than we can remember. It is worth a look if you haven’t seen it.

The researcher we follow most closely on the topic of memory is American academic Elizabeth Loftus of UC Irvine. One of her specialties is how eyewitness testimony in criminal cases can be incorrect, leading to false convictions. The crossover to the stresses of investing and how those affect our memories is what drew us first to her work. Here is a sample:

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