5 ms·

This article is essentially a press release for the author's own paper: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1047 https://onlinelibrary.wiley.co

by btn 8y ago

This article is essentially a press release for the author's own paper: https://onlinelibrary.wiley.com/doi/abs/10.1002/jcpy.1047 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 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 be that "loss aversion" has been the victim of incessant overgeneralisation. It's a very simple hypothesis about human behaviour that plays nicely into a lot of interesting (and therefore publishable) narratives. This has lead people to blindly accept the general hypothesis of loss aversion without enough critical investigation of its manifestation. The authors don't really refute "loss aversion" (i.e. they don't present an alternative theory to explain the papers that purport to demonstrate "loss aversion"), but rather they refute the pop-psychology belief that it's a general principle of human behaviour.

deleted 8y ago
[deleted]
dwaltrip 8y ago
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.
- mannykannot 8y ago
  Over-generalization is common beyond the social sciences as well. It is often found in the basis given for false dichotomies, which are not uncommon in discussions of how to write software. It is also apparent in many of the claims made by clickbait titles.
- kelnage 8y ago
  I’d say it’s true of most knowledge, regardless of domain. AI seems like a great candidate in computer science, for example.
  - ratacat 8y ago
    Oh god yes! I see it often in our perceptions of "the other" as well. Other cities, other societies, other places....
  - dwaltrip 8y ago
    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.
jonny_eh 8y ago
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 https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193
- pas 8y ago
  How well does that [the original] replicate? Is there non-self-reported data for it?
- thatthatis 8y ago
  “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.
  - snowwrestler 8y ago
    "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.
- prabhasp 8y ago
  That is the endowment effect https://en.m.wikipedia.org/wiki/Endowment_effect https://en.m.wikipedia.org/wiki/Endowment_effect
mordae 8y ago
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.
- vezycash 8y ago
  Note: What people say they'll do and what they end up doing are usually different. Actual investor behavior is sell winning investment, and hold on to losing investment until loses triple. And sell for significant loss. Recent Tesla short sellers come to mind.
- judofyr 8y ago
  > Did not even have to go to check the sources Yeah, it would be terrible if you read through 59 pages of well-cited, well-explained text and tried to understand what the author is saying. Might as well judge everything from one sentence in an online article written for popular audiences. > He refuted himself right there, in the article. That example is showing an example of Status Quo Bias that is completely orthogonal to losses/gains: People prefer inactivity to activity. If you construct an experiment where doing nothing constitutes the "loss" (e.g. keeping an item) and doing something is the "gain" (e.g. obtaining a new item) then you would expect people to prefer the first choice. For loss aversion to be a general principle you need to decouple it from the status quo bias.
- darkerside 8y ago
  That's the problem with any of these social theories. Losing what? Gaining what? We're lacking a clear definitions of terms. I know it's a trope, but it really is just so unscientific.
judofyr 8y ago
Are you reading the same article as me? As they mentioned: > Loss aversion has been represented as a fundamental principle. Loss aversion is not understood as the idea that losses can or sometimes loom larger than gains, but that losses inherently, perhaps inescapably, outweigh gains. For example, Kahneman, Knetch, and Thaler (1990, p. 1326) describe loss aversion as "the generalization that losses are weighted substantially more than objectively commensurate gains." In a similar fashion, other researchers do not qualify the idea of loss aversion; Tversky and Kahneman (1986, p. S255) state that "the response to losses is more extreme than the response to gains;" and Kahneman and Tversky (1984, p. 342) state "the value function is … considerably steeper for losses than for gains." The authors are refuting "loss aversion" as Kahneman et al is describing it. > (i.e. they don't present an alternative theory to explain the papers that purport to demonstrate "loss aversion") Why do they need to? The paper isn't about trying to explain when losses or gains are most impactful; the paper is about whether or not there's a clear tendency.
- vezycash 8y ago
  Big words don't count as evidence. The article brings absolutely no new information to the table. Heck, I think this article's a clickbait. The basic principle behind loss aversion is simple. What's the primary motive behind an action - Running away or running towards? Prevention or gain. For instance. Yesterday an article about American child care was on HN. American parents are acting primarily to PREVENT injury, discomfort or death of their children. That's action motivated by loss aversion. Japanese, maya parents still want safety for their children but independence of their kids is a primary motivator for their action. In other words gain. I think the author is confused about something. I want more money and I don't want to lose the ones I have. Both feelings aren't mutually exclusive. However at the point of decision I could be swayed more by greed or by fear. If a site, seller or investment is shady, fear wins. I'll protect myself. If not, greed or gain could win in that instance. I could speed down towards a party one moment. And a near miss could make me reconsider and slow down. Both modes occurred on the same journey. No grammar by some clickbaity author would change that.
  - judofyr 8y ago
martincmartin 8y ago
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."
joshgel 8y ago
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
- jonahx 8y ago
  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.

by btn 8y ago

deleted 8y ago

[deleted]

dwaltrip 8y ago

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.

mannykannot 8y ago
Over-generalization is common beyond the social sciences as well. It is often found in the basis given for false dichotomies, which are not uncommon in discussions of how to write software. It is also apparent in many of the claims made by clickbait titles.
kelnage 8y ago
I’d say it’s true of most knowledge, regardless of domain. AI seems like a great candidate in computer science, for example.
- ratacat 8y ago
  Oh god yes! I see it often in our perceptions of "the other" as well. Other cities, other societies, other places....
- dwaltrip 8y ago
  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.

jonny_eh 8y ago

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

pas 8y ago
How well does that [the original] replicate? Is there non-self-reported data for it?
thatthatis 8y ago
“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.
- snowwrestler 8y ago
  "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.
prabhasp 8y ago
That is the endowment effect https://en.m.wikipedia.org/wiki/Endowment_effect https://en.m.wikipedia.org/wiki/Endowment_effect

mordae 8y ago

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.

vezycash 8y ago
Note: What people say they'll do and what they end up doing are usually different. Actual investor behavior is sell winning investment, and hold on to losing investment until loses triple. And sell for significant loss. Recent Tesla short sellers come to mind.
judofyr 8y ago
> Did not even have to go to check the sources Yeah, it would be terrible if you read through 59 pages of well-cited, well-explained text and tried to understand what the author is saying. Might as well judge everything from one sentence in an online article written for popular audiences. > He refuted himself right there, in the article. That example is showing an example of Status Quo Bias that is completely orthogonal to losses/gains: People prefer inactivity to activity. If you construct an experiment where doing nothing constitutes the "loss" (e.g. keeping an item) and doing something is the "gain" (e.g. obtaining a new item) then you would expect people to prefer the first choice. For loss aversion to be a general principle you need to decouple it from the status quo bias.
darkerside 8y ago
That's the problem with any of these social theories. Losing what? Gaining what? We're lacking a clear definitions of terms. I know it's a trope, but it really is just so unscientific.

judofyr 8y ago

Are you reading the same article as me? As they mentioned: > Loss aversion has been represented as a fundamental principle. Loss aversion is not understood as the idea that losses can or sometimes loom larger than gains, but that losses inherently, perhaps inescapably, outweigh gains. For example, Kahneman, Knetch, and Thaler (1990, p. 1326) describe loss aversion as "the generalization that losses are weighted substantially more than objectively commensurate gains." In a similar fashion, other researchers do not qualify the idea of loss aversion; Tversky and Kahneman (1986, p. S255) state that "the response to losses is more extreme than the response to gains;" and Kahneman and Tversky (1984, p. 342) state "the value function is … considerably steeper for losses than for gains." The authors are refuting "loss aversion" as Kahneman et al is describing it. > (i.e. they don't present an alternative theory to explain the papers that purport to demonstrate "loss aversion") Why do they need to? The paper isn't about trying to explain when losses or gains are most impactful; the paper is about whether or not there's a clear tendency.

vezycash 8y ago
Big words don't count as evidence. The article brings absolutely no new information to the table. Heck, I think this article's a clickbait. The basic principle behind loss aversion is simple. What's the primary motive behind an action - Running away or running towards? Prevention or gain. For instance. Yesterday an article about American child care was on HN. American parents are acting primarily to PREVENT injury, discomfort or death of their children. That's action motivated by loss aversion. Japanese, maya parents still want safety for their children but independence of their kids is a primary motivator for their action. In other words gain. I think the author is confused about something. I want more money and I don't want to lose the ones I have. Both feelings aren't mutually exclusive. However at the point of decision I could be swayed more by greed or by fear. If a site, seller or investment is shady, fear wins. I'll protect myself. If not, greed or gain could win in that instance. I could speed down towards a party one moment. And a near miss could make me reconsider and slow down. Both modes occurred on the same journey. No grammar by some clickbaity author would change that.
- judofyr 8y ago

martincmartin 8y ago

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."

joshgel 8y ago

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

jonahx 8y ago
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.