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

Re: Loss aversion is not supported by the evidence

#91

Post by Izkata » Sun, Aug 05, 2018, 2:41 PM UTC

epx wrote: post #34

The loss aversion is almost trivially explained by the marginal value theorem. The subjective value of money is around log(money), that is, a meaningful change takes an extra 0 in the paycheck or in the price tag. So, if you have $200, getting $100 one thing, losing $100 is way worse, since log(200)=2.30, log(200)-log(100)=0.3, log(300)-log(200)=0.18. A potential loss of $100 must be rewarded by a gain of $200 to "fe…

Another experiment with similar results, that humans naturally think logarithmically: http://news.mit.edu/2012/thinking-logarithmically-1005

Re: Loss aversion is not supported by the evidence

#92

Post by albedoa » Sun, Aug 05, 2018, 2:52 PM UTC

knn wrote: post #31

I'm picking through the author's paper and I don't buy this conclusion. I have a bone to pick with his evidence: for example, he makes a comparison between "willingness to expend time to drive to obtain an accidentally left behind unused, new-condition notebook (vs. willingness to expend driving time to obtain a new notebook at no financial cost)". The extent of the former he denotes as WTP-Retain and the latter WTP-…

He did that all throughout the linked article too: "People do not rate the pain of losing $10 to be more intense than the pleasure of gaining $10." Okay. That's not loss aversion though.

"People do not report their favorite sports team losing a game will be more impactful than their favorite sports team winning a game." Same.

Re: Loss aversion is not supported by the evidence

#93

Post by [deleted] » Sun, Aug 05, 2018, 3:29 PM 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…

[deleted]

Re: Loss aversion is not supported by the evidence

#94

Post by gboudrias » Sun, Aug 05, 2018, 3:59 PM UTC

Vinnl wrote: post #49

gboudrias wrote: post #30

Earlier quoted context omitted.

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…

So what if the "certain topic" is something with no immediately obvious thing that "works", e.g. climate change?

I'm afraid I don't know enough to talk about it, but to me it seems more of a collection of observations than a "theory" in the speculative sense. As far as I'm aware though, we have observed that cities with less greenhouse gases tend to be colder, so in that sense lowering CO2 levels "works" to reduce temperature, though we can't speak of global "correctness" until we manage the same with the global temperature.

This is a special case however, in that we have to assume correctness because otherwise we'll all be much worse off, and the possible cost of reducing pollution are slim in comparison. But if anything I think this supports my point that correctness itself doesn't matter, only the material consequences do.

Re: Loss aversion is not supported by the evidence

#95

Post by tarboreus » Sun, Aug 05, 2018, 4:03 PM UTC

nothrabannosir wrote: post #47

judofyr wrote: post #40

Earlier quoted context omitted.

> The article brings absolutely no new information to the table. Did you read the paper? It's not a paper that "brings new information to the table", it's a paper which presents recent experiments and tries to show that there is little scientific evidence of loss aversion. > The basic principle behind loss aversion is simple. Huh? I don't understand what you're saying? You're saying that "loss aversion" is simple, bu…

> Did you read the paper? … Huh? … you should be aware that … I have no skin in this one but I would like to call this out: these comments make an argument combative. It pushes people up a tree and makes it hard to focus on the facts. Imagine user vezycash actually was swayed by your argument; how easy would it be for them to say, hey, you’re right? Pretty hard after all those comments, because it ties in their pride…

This comment should be printed out and hung in Times Square.

Re: Loss aversion is not supported by the evidence

#96

Post by dwaltrip » Sun, Aug 05, 2018, 4:05 PM UTC

kelnage wrote: post #23

dwaltrip wrote: post #9

Earlier quoted context omitted.

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.

In the hard sciences, for example, the problems that people work on are often less complex and more removed from everyday human life. I think this causes for much less over-generalization to occur.

Re: Loss aversion is not supported by the evidence

#97

Post by snowwrestler » Sun, Aug 05, 2018, 4:19 PM UTC

thatthatis wrote: post #79

jonny_eh wrote: post #24

Earlier quoted context omitted.

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.

"Loss aversion" as a cognitive bias is not just the desire to avert any loss.

If it really is a general cognitive bias, it will show up as a difference from expected statistics.

Imagine a held asset that has an even chance of going up or down. You'd expect to see about half of people sell it and half hold it. A cognitive bias would alter that ratio. If 75% of people sold it, and only 25% held it (despite even odds), you could say that there appears to be a bias at work.

A great example of cognitive bias at work in the real world is the Monty Hall 3 door riddle. Most people get this wrong even though the math is not hard.

But simply avoiding a predicted loss is not "loss aversion" as a cognitive bias. It's not even a bias at all; it's rational to avoid loss.

Re: Loss aversion is not supported by the evidence

#98

Post by jonahx » Sun, Aug 05, 2018, 5:08 PM UTC

joshgel wrote: post #74

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

It's not a logical fallacy, though. There is just no evidence for it, and we understand intuitively how far-fetched it is. But it's certainly _possible_ that institutional bias explains those results. It just happens not to be the case.

If we're looking for a general logical fallacy, it might be something like, "Using the mere fact of theoretical possibility as a way to justify unlikely beliefs, or as a counter-argument to strong evidence." I'd love to know if there's a term for that. It comes up everywhere.

Re: Loss aversion is not supported by the evidence

#99

Post by jl2718 » Sun, Aug 05, 2018, 5:16 PM UTC

ggm wrote: post #6

Economics as a pseudo science of emphatic statements about human behaviour is looking pretty tragic.

Behavioral economics exists only because psychology has completely lost objectivity and focused on agenda. This article is a good example, uses cognitive ‘proof’ for a behavioral hypothesis. Trash.

Re: Loss aversion is not supported by the evidence

#100

Post by danschumann » Sun, Aug 05, 2018, 5:36 PM UTC

Losing money makes you a loser, gaining money is normal, so beyond the actual event, there are identity things at play. In their terms, spending more on a product or less, is not actually touching that identity, because both are just being a spender. I agree about the consequences part: losing equals no roof vs winning equals extra vacation. I think the rest is about the identity that comes with losing.