The decisions investors make depend on how averse to risk they are and on how high the returns of the assets are relative to their risk.

A few years back I volunteered at an archeological site in Range Creek, Utah. I learned that archeology is arguably the most interdisciplinary subject in the world. And I learned that I don't have the eyesight or the tolerance for dust needed to succeed in that field. I also learned a lesson about the interesting ways that economic thinking can inform our understanding of societies, even ones that leave no written history.

Range Creek is a unique site because it is remotely located in the Book Cliffs area east of Price and north of Green River. Native Americans that we now call the Fremont people lived in this area from roughly 700 to 1700 years ago. In the 1950's the Wilcox family began farming and ranching along Range Creek. Oldest son, Waldo Wilcox, became the eventual owner and manager of the ranch. In 2001 he proposed selling his land to the State of Utah for public recreational use. It was then that the rest of the world discovered what Waldo had known for years, that there were numerous pristine archeological sites in Range Creek that have lain undisturbed since the Fremont left 700 years ago.

One of the unique features they left behind is numerous granaries located at various places along the cliffs. It is clear that maize and other local grains were stored here. Moreover the granaries are remote and require technical climbing gear to access in many cases. For the most part the Fremont were living and farming the bottom of the canyon near the river, but at the same time were storing a great deal of maize high on the cliffs away from their dwellings.

Dr. Renee Barlow, of the Prehistory Museum at the College of Eastern Utah, who was overseeing the site where I volunteered, noted that one possible motive for storing grain there is a fear of an incursion where outsiders might come and steal grain. Hiding the grain in remote sites would make it more difficult to steal, but it does require a great deal of effort to transport the maize to and from the granaries, not to mention the work involved in building it in the first place. There are other reasons for building granaries where they are found, but unless we know how likely it was that outsiders would try to steal grain, we can't determine if that motive makes sense.

I volunteered for three days, a Thursday through Saturday in October. I went back to Orem with sunburns and a sore back and returned to teaching economics the following Monday. At the time I was teaching a class in international financial theory, a topic as unrelated to Fremont maize farmers as imaginable. However, while lecturing on the basics of portfolio theory I began to notice similarities between the problems facing modern investors and Fremont farmers.

A modern investor takes a pool of money and optimally distributes these funds over a set of investment assets. Some of these assets are very safe, and have low rates of return. Others are risky, but compensate for this risk by offering higher payoffs. The decisions investors make depend on how averse to risk they are and on how high the returns of the assets are relative to their risk.

Similarly, a Fremont farmer took a pool of harvested maize and distributed it optimally over various storage sites. Some of these were safe from outside incursions because they were located high on the cliff walls. These sites offered low returns in terms of calories and nutrition since calories were expended transporting the grain so far from the fields where it was grown. Other sites were more risky, such as storing maize near the fields where the Fremont lived, but offered higher caloric returns as transport was much easier. The decisions the farmer made depended on how risk averse they were and on how likely it was that outsiders would try to raid their grain supply. Also, it depended on how difficult it was to transport the grain up and down the cliffs.

In a paper that is being published later this year, Dr. Barlow and I showed that with reasonable level aversion to risk — similar to those of subsistence farmers in other parts of the world today — granaries high on the cliffs would have made economic sense even if the probability of an incursion were only as high as five percent. Construction of these granaries can be rationalized by similar levels of threat.

Hence it seems perfectly reasonable that some sort of outside threat could have motivated the Fremont in Range Creek to store maize in granaries on the cliffs. Of course there may have been other reasons as well and it may be that outsiders were not the primary reason for building the granaries. But we now know that it is possible.

I find it quite interesting that something so esoteric as portfolio theory can inform us about the lifestyles of a people who lived almost a thousand years ago and left no written record. This is one of the reasons I enjoy studying and teaching economics.

Kerk Phillips is an associate professor of economics at BYU.