Experiencing The Endowment Effect
I recently decided that it was finally time for a new car, so after a lot of shopping around, I picked one out and ordered one. There was definitely some significant psychic pain involved in spending that much money, but I spent many hours thinking over and discussing the decision, and am happy with the purchase.
The release of the Kindle has made me realize just how much clutter books add to my life – including books I may never get to, and others I’ve read but will never read again. To have those books on an SD card instead of piled in my room and shelves sounds wonderful. So as a first step in decluttering, I’m getting rid of all the books I expect to never open again. Perhaps then I’ll get ebook versions of the books I actually read and get rid of the physical copies.
I’m planning to just give my books to friends or Goodwill, since the effort it would take to sell them (list, package, and ship) would not be worth my time. Yet in contemplating this, I’m experiencing psychic pain far, far greater than that of buying my new car, even though the total cost of these books is only a few thousand dollars. Thanks to the damn endowment effect, it is so much easier to convince myself that a high income justifies buying expensive things than throwing away cheap ones.
And it’s just so clearly irrational. If I considered the total income from selling the books, and the time it would take, and I encountered it in the context of "Would you pay this much in order to save that much of your time?", I’m sure I would. Yet framed as "Would you rather throw these things away, or put in this much time to eke that much value from them", it feels like a terribly wasteful decision.
Ah well. I’ve had enough practice at overcoming bias that when I can clearly and consciously identify what’s going on, I can usually do the right thing. I just wish the psychic pain was more amenable to being argued out of existence.
I'm more likely to simply buy a new hard drive. At this point search technology is good enough (and my computer skills are high enough) to allow me to retrieve pretty much whatever I want from my hard drive with little effort. However, it still takes me a fair amount of work to go through a directory tree and clear out the files that aren't relevant anymore. As hard drive costs have plummeted in recent years, I find that the monetary cost of a new hard drive is less than the opportunity cost of cleaning out the existing drive.
For consistency, should we be as committed to eliminating the endowment bias in interpersonal relationships as in our treatment of objects? Is there really no value to our inclination to hold on to people because they are "ours"? If we could, should we try to treat all people, already-ours and not-yet-ours, as equally valuable, all other things being equal? If so, is the quest of seeking out and maintaining committed relationships misguided? And if it isn't, and if the endowment bias with respect to people is actually useful, should we then "practice" it by allowing it to remain in other areas in our life?