Tuesday, July 08, 2008

Mine, all mine

The article on June 19th on the endowment effect caused a range of reactions. Some readers thought it was brilliant, others thought it was brainless. The endowment effect is a quirk whereby once someone owns something, he places a higher value on it than he did when he acquired it. I looked at the possible evolutionary origins of this phenomenon in the article:

It’s mine, I tell you, Jun 19th 2008
Mankind’s inner chimpanzee refuses to let go. This matters to everything from economics to law

The reason that the endowment effect still upsets a few people is because it undermines this idea of rational economic man, which has been the core of a lot of economic theory for some years. But behavioural economics and evolution keep chipping away at this idea.

fostercj wrote on June 23 had a different idea for why people keep trying to insist we all act rationally: "That's the endowment effect at work. I'd rather hold on to the theory I've got than trade it even if the new theory is the one I'd have chosen if offered both to begin with. That definitely has some policy implications."

But awinkle on June 22 had a different view: "The endowment effect is NOT irrational. Purchasing items requires time and resources. That is where the added value comes from. If I trade my ashtray for yours, that is a fair trade. If you pay me sticker price for my ashtray, then I have to go out and buy a new one, that is a waste of time for me!table and I'm told to pick one."

Some picked up on the more philosophical aspects of stuff. Genghis Cunn wrote on June 23:
"The Buddha explained the process by which humans develop attachment and craving, a process which with a little training each of us can observe within ourselves."

Along with the article, I co-wrote a jokey leader (op-ed):
The curse of untidiness: DNA all over the place, Jun 19th 2008
Clutter is not just an evolutionary adaptation, but also a business opportunity