Loss aversion is not supported by the evidence • Hacker News Board

Re: Loss aversion is not supported by the evidence

#21

Post by vezycash » Sun, Aug 05, 2018, 6:40 AM UTC

watwut wrote: post #18

vezycash wrote: post #15

The Ikea effect is a form of loss aversion. This alone shows that someone hasnt done their homework. "A bird in hand is worth two in the bush" is a popular saying with its equivalent in almost every culture. Diversification which is studied, recommended and practiced by almost every investor, CEO, child... Is related to loss aversion. There are many more real life examples of loss aversion.

Calculated strategies to prevent loss are not loss aversion as psychologists use it. Neither is preventing catastrophic "I spend the rest of life in jail" loss.

Calculated or not, loss aversion is loss aversion. The principle, thinking or motive behind diversification isn't investment growth. It's to prevent total loss. I'm other words, loss aversion.

You said nothing about the Ikea effect.

Here's more.

Why do people stay in abusive relationships with individuals & companies? I've put in so much, can't back off now. Scammers know and use this to great effect. Once you've paid, you'll keep paying.

Why do investors rush to sell winning stocks but stick stubbornly to losing losing stocks or trades?

The network effect is powerful because of loss aversion. "All my contacts, friends, pictures are in..." so I can't switch.

LOSS AVERSION CHEAT SHEET.

Ask anyone for the reason behind an action. If the sentence begins with or is dominated by, "I don't want" or "I didn't want..." the action was motivated by loss aversion.

Re: Loss aversion is not supported by the evidence

#22

Post by Jweb_Guru » Sun, Aug 05, 2018, 6:42 AM UTC

vezycash wrote: post #21

watwut wrote: post #18

Earlier quoted context omitted.

Calculated strategies to prevent loss are not loss aversion as psychologists use it. Neither is preventing catastrophic "I spend the rest of life in jail" loss.

Calculated or not, loss aversion is loss aversion. The principle, thinking or motive behind diversification isn't investment growth. It's to prevent total loss. I'm other words, loss aversion. You said nothing about the Ikea effect. Here's more. Why do people stay in abusive relationships with individuals & companies? I've put in so much, can't back off now. Scammers know and use this to great effect. Once you've pai…

This is not loss aversion and is explicitly covered in the article.

Re: Loss aversion is not supported by the evidence

#23

Post by kelnage » Sun, Aug 05, 2018, 6:44 AM UTC

dwaltrip wrote: post #9

btn wrote: post #7

This article is essentially a press release for the author's own paper: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1047 Which itself is a part of a series of articles in JCP debating the issue: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1054 The definitive statement made by this article's headline isn't really supported by the evidence presented in the papers. Rather, the state of affairs seems to…

Thanks for the phrase "incessant overgeneralization" -- I didn't even realize I was looking for that. It seems that this is something the social sciences are inherently at risk of, given how closely the topics are to our everday lives.

I’d say it’s true of most knowledge, regardless of domain. AI seems like a great candidate in computer science, for example.

Re: Loss aversion is not supported by the evidence

#24

Post by jonny_eh » Sun, Aug 05, 2018, 6:49 AM UTC

btn wrote: post #7

This article is essentially a press release for the author's own paper: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1047 Which itself is a part of a series of articles in JCP debating the issue: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1054 The definitive statement made by this article's headline isn't really supported by the evidence presented in the papers. Rather, the state of affairs seems to…

That's a great summation. It seems as though there's confusion as to what constitutes loss aversion. IIRC, the original paper by Kahneman, Knetsch, and Thaler [0] talked about losing something you had. Meanwhile, the posted argument talks about whether someone is more or less likely to buy something if the price goes up or down. These are such different situations! The first is losing something you have, the second is deciding whether you want to trade some money for a thing.

[0] https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193

Re: Loss aversion is not supported by the evidence

#25

Post by jonny_eh » Sun, Aug 05, 2018, 6:51 AM UTC

nyolfen wrote: post #2

psychology as a discipline is not looking so hot these days

This is just a disagreement within a discipline, it's healthy.

Re: Loss aversion is not supported by the evidence

#26

Post by nsmog767 » Sun, Aug 05, 2018, 6:51 AM UTC

everdev wrote: post #5

> People do not report their favorite sports team losing a game will be more impactful than their favorite sports team winning a game. For fans of winning teams (Warriors, Patriots, etc.) I'm not sure if this is true. They're expected to win, so watching them win can feel like nervous relief or ambivalence but watching them lose can feel like disappointment. I think we see loss aversion in soccer too where teams will…

I anecdotally agree with this. Since I learned about the concept of loss aversion, I've noticed instances where I have to consciously force myself to acknowledge opportunity cost, or the tangible loss dominates in my head.

Re: Loss aversion is not supported by the evidence

#27

Post by Negative1 » Sun, Aug 05, 2018, 7:01 AM UTC

The author is the one "peddling" the idea that loss aversion is a phalacy but at least he seems to (ironically) recognize that his argument is in itself part of the social/argumentative part of science. Even so, this article seems to draw conclusions as if they were widely held beliefs (I'm not qualified to speak to these claims until I do my own research).

Re: Loss aversion is not supported by the evidence

#28

Post by mordae » Sun, Aug 05, 2018, 7:13 AM UTC

btn wrote: post #7

This article is essentially a press release for the author's own paper: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1047 Which itself is a part of a series of articles in JCP debating the issue: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1054 The definitive statement made by this article's headline isn't really supported by the evidence presented in the papers. Rather, the state of affairs seems to…

Did not even have to go to check the sources:

> And people are not particularly likely to sell a stock they believe has even odds of going up or down in price (in fact, in one study I performed, over 80 percent of participants said they would hold on to it).

He refuted himself right there, in the article.

Re: Loss aversion is not supported by the evidence

#29

Post by neilwilson » Sun, Aug 05, 2018, 7:15 AM UTC

Hypothesis: the set of people who want to see loss aversion refuted intersection (sic) heavily with the set of people who want to raise taxes

Re: Loss aversion is not supported by the evidence

#30

Post by gboudrias » Sun, Aug 05, 2018, 7:16 AM UTC

throwawaymath wrote: post #8

Hmm... So here is an interesting thought experiment. Suppose you take a person with some appreciable intelligence (at least average) but no particular knowledge about a certain topic. In this instance, we'll let that topic be psycology. Now we present this person with an unfortunate dilemma. For a particular hypothesis, they observe a significant amount of peer reviewed literature asserting empirical evidence in the…

Your question is certainly interesting in an epistemological sense, in a way it is the basis of relativism.

Having read Larry Laudan recently however, I'm a big fan of his pragmatism which trumps the question a bit: just use whatever works.

In this case, we don't all need to be aware of loss aversion, and really I suspect barely anyone was using it in a practical sense. A pragmatist might say that it was only ever a theory, and this is why it thrived in largely theoretical exercises (or in the case of economics, in a context where the tangible consequences were extremely far removed from the application of the theory). But to me loss aversion still seems like an observation after the fact, though I did believe it at the time, which are the worst kind of observations ;)

In short, from where I stand there is no such thing as "correctness", only what has been successfully applied and in what context, or temporary applicability if you will. Any further interpretation is usually a case of extrapolating knowledge from a vastly incomplete picture. Being a psychology student, I look at its early history as a tragic example of why this is counterproductive. Some habits are hard to break though.