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Loss aversion is not supported by the evidence

blogs.scientificamerican.com

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Re: Loss aversion is not supported by the evidence

#71

Post by martincmartin »

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…

Also, the title doesn't claim the evidence refutes it, just that it doesn't support it. Recalls the Carl Sagan quote, "Absence of evidence isn't evidence of absence."

Re: Loss aversion is not supported by the evidence

#72

Post by darkerside »

This article is getting flamed pretty good. Here's another perspective I've learned as a software developer. Building on incorrect abstractions is much more damaging than redundancy in your code. It obscures the underlying design that you're trying to unearth and model, leading others down a path with a weak foundation. I think we're well served to narrow the scope of any scientific finding beyond what might seem reasonable. The human mind is a pattern identification machine, and it finds false positives in science as often as it does in religion.

Re: Loss aversion is not supported by the evidence

#73

Post by gbear605 »

Cacti wrote: post #70
lolc wrote: post #60

I don't find the listed examples convincing. Especially: > 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). How naïve is that? We're not interested in what people said they would do. We want to know what they did!

Have you paid attention to either of the past US market busts, in 2000-2001 and 2008? People overwhelmingly ride it into the ground because of two things: - The fear of realizing a loss - The unrealistic expectation of upside Also, you'd be hard pressed to find a stock IRL that you could predict in advance as "50/50" and see what participants do, wouldn't you?

It seems like it would be fairly simple to design an stock market simulation (with real money payouts) to test this.

Re: Loss aversion is not supported by the evidence

#74

Post by joshgel »

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…

Their argument reminds me of climate change “skeptics” arguments that there is some sort of institutional bias towards papers that support climate change as a theory, which therefore is why all the papers and all the evidence support the climate change theory.

Is there a term for this kind of logical fallacy? It’s almost in ad hominem argument against an entire group

Re: Loss aversion is not supported by the evidence

#76

Post by dosy »

> However, this process advantages incumbent theories over challengers for a number of reasons, including confirmation bias, social proof, ideological complacency, and the vested interests of scientists whose reputations and even sense of self are tied to existing theories. A consequence is scientific inertia, where weak or ill-founded theories take on a life of their own, sometimes even gaining momentum despite evidence that puts their veracity in doubt.

A wonderful, concise summary of some of the human obstacles to the progress of ideas, theories, stories and models about people and the world, scientific in nature or not.

Re: Loss aversion is not supported by the evidence

#77

Post by hn_throwaway_99 »

lolc wrote: post #60

I don't find the listed examples convincing. Especially: > 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). How naïve is that? We're not interested in what people said they would do. We want to know what they did!

I not only don't find his examples particularly convincing, but in many cases I don't even think they are really examples of loss aversion to begin with. I've always interpreted loss aversion as "It's worse to lose something you've already attained than to miss out on something you never had in the first place."

His example of "Messages that frame an appeal in terms of a loss (eg, “you will lose out by not buying our product”) are no more persuasive than messages that frame an appeal in terms of a gain (eg, “you will gain by buying our product”)" is extremely weak IMO. In both cases the consumer never had the product to begin with. The author is trying to argue FOMO is the same thing as loss aversion, which on the contrary, FOMO is really greed.

Re: Loss aversion is not supported by the evidence

#78

Post by andybak »

I do struggle sometimes to see how one could do proper science in the field of psychology. It always seems like every experiment contains multiple hidden assumptions, a myriad of uncontrolled-for variables and has more alternative hypotheses that fit the data than you could shake a stick at.

Is this me being all Dunning Kruger? Is it my positivist bias obscuring my vision? Have I misunderstood the nature of the scientific method or missed some major aspect of practical epistemology? I sincerely hope so as the alternative explanation regarding the nature and visibility of the emperor's couture is rather upsetting.

I do genuinely think I am probably - at least partially - incorrect on this. But I would like some help in shaking my sense of unease.

Re: Loss aversion is not supported by the evidence

#79

Post by thatthatis »

jonny_eh wrote: post #24
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 i…

“The price will rise, but now” is the most tenuous loss aversion I’ve ever heard of.

“You have a $10 credit, it expires in 2 days” would test loss aversion.

That consumers behave rationally in the face of price rises is an interesting finding. But it’s a far cry from testing loss aversion.

Re: Loss aversion is not supported by the evidence

#80

Post by pbhjpbhj »

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.

I hadn't heard of The IKEA effect:

>"The IKEA effect is a cognitive bias in which consumers place a disproportionately high value on products they partially created." //

Which is a weird turn of phrase, as almost all IKEA stuff is already fully created, you just fit it together. I guess they mean something you put effort in to realising.

I'm not sure I agree, I think people preference stuff they took part in the production of (like kids helping with cooking their own tea), but I'm not sure we consider them higher value in an objective sense ... we often prefer things that we know to be of objective lower value, like in sentimental attachment.

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