The Believing Brain - Michael Shermer [144]
Endowment Effect
The psychology underlying the status quo bias is what economist Richard Thaler calls the endowment effect, or the tendency to value what we own more than what we do not own. In his research on the endowment effect, Thaler has found that owners of an item value it roughly twice as much as potential buyers of the same item. In one experiment, subjects were given a coffee mug valued at $6.00 and they were asked what they would take for it. The average price below which they would not sell was $5.25. Another group of subjects were asked how much they would be willing to pay for the same mug and gave an average price of $2.75.22
Ownership endows value by its own virtue, and nature has endowed us to hold dear what is ours. Why? Evolution. The endowment effect begins with the natural propensity for animals to mark their territories and defend them through threat gestures and even physical aggression if necessary, thereby declaring the equivalent of private ownership to what was once a public good. The evolutionary logic runs like this: once a territory is declared taken by one animal, would-be trespassers have to invest considerable energy and risk grave bodily injury in attempts to acquire the property for themselves, so there is an endowment effect. We are more willing to invest in defending what is already ours than we are to take what is someone else’s. Dogs, for example, will invest more energy in defending a bone from a challenger than they will in absconding with some other dog’s bone. The endowment effect with property ownership has a direct and obvious connection to loss aversion, where we are twice as motivated to avoid the pain of loss as we are to seek the pleasure of gain. Evolution has wired us to care more about what we already have than what we might possess, and here we find the evolved moral emotion that undergirds the concept of private property.
Beliefs are a type of private property—in the form of our private thoughts with public expressions—and therefore the endowment effect applies to belief systems. The longer we hold a belief, the more we have invested in it; the more publicly committed we are to it, the more we endow it with value and the less likely we are to give it up.
Framing Effects
How beliefs are framed often determines how they are assessed, and this is called the framing effect, or the tendency to draw different conclusions based on how data are presented. Framing effects are especially noticeable in financial decisions and economic beliefs. Consider the following thought experiment presented in two different frames for the same financial problem:
1. Phones Galore offers the new Techno phone for $300; five blocks away FactoryPhones has the same model half off for $150. Do you make the short trip to save $150? Sure you would, right?
2. Laptops Galore offers the new SuperDuper computer for $1,500; five blocks away FactoryLaptops has the same model discounted to $1,350. Do you make the short trip to save $150? Nah, why bother?
In research where subjects are offered such choices, most people would take the trip in the first scenario but not the second, even though the amount saved is the same! Why? The framing changes the perceived value of the choice.
Framing effects can be found in both political and scientific beliefs. Here is a classic thought experiment with real-world implications: You are a contagious disease expert at the Centers for Disease Control and you have been told that the United States is preparing for the outbreak of an unusual Asian disease that is expected to kill six hundred people. Your team of experts has presented you with two programs to combat the disease:
Program A: Two hundred people will be saved.
Program B: There is a one-third probability that all six hundred people will be saved, and a two-thirds probability that nobody will be saved.
If you are like the 72 percent of the subjects in an experiment that presented this scenario, you chose Program