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.
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?
I don't know of any science behind it, but books are indeed special. I was voted "class bookworm" in high school--a great honor. When my shelves overflow, I give the excess to the library, which sells them for $1. It took me years to get to the point of being able to do that.
There are a couple of recent experimental papers in the American Economic Review (2005, 2007) by Charles Plott and Kathryn Zeiler in which they more or less claim that the endowment effect doesn't really exist. People can definitely come to be emotionally attached to things, but (they argue) the original experimental results that seemed to show that people placed extra value on things merely because they owned them aren't right.
I guess I've noticed a similar effect. Once I fill all my available hard-drive space, I'm more likely to stop downloading/installing new things than to clear the crap off it.
This is very strange. I never thought I had invested books with any special sort of sacred status, but reading James' story gave me a very noticeable internal twinge. Upbringing, education, who knows why, but throwing a book away would feel odd to me. Irrational I know, but interesting nonetheless. If there's a silver lining to this bias, let's hope it's that we tend to hold symbols of information and learning in such high regard.
Depending on what you have on your bookshelves of course....
I'd never heard of the Kindle, it doesn't appear to be available in the UK. Looks very snazzy though. Does this mean we can't judge books by their cover art?
I don't understand the main post or several of the comments, which seem to imply that the number of books you possess would not be a monotonically increasing function of time. Isn't this a reductio ad absurdum?
Besides, what's the whole point of having a house (or apartment) if not to keep the rain off your books? If you owned a Kindle, why wouldn't you just live in a 7' x 7' box? And what about your bookcases - how will you fit one Kindle into all of them?
The whole concept of a Kindle is silly. It will never catch on.
You have no idea what the book said on the outside. Why do you think you can judge the purchase as irrational? I would not have made the purchase myself, but I am probably more risk averse with money than James.
Above you said, "This also doesn't make sense to me. There is no negative social utility here -- the clerk doesn't care. Whatever uncomfortability you felt was in your mind alone, and that is probably the least rational part of your account."
Just because you see no negative utility doesn't mean that someone else doesn't. Yes it was in his mind. You can claim it's irrational, but that doesn't make it less real. Utility is within a person based on their personal values. Rationality is not relevant because emotions and values are simply not rational.
I think the reason that most people don't understand his action is the sunk cost fallacy; they believe that the book has value because he spent money on it. Also most people probably do not share his values.
My favorite way to dispose of unwanted books is to have a used book party. Invite over a dozen of your bookish friends, many of whom probably also have piles of books they no longer want to keep around. Everybody brings their books over, picks through the others, and generally interesting discussion ensues. Everybody goes home with a few to a lot of new books. Ideally, you are left with approximately the same size pile of books you started with, but have now acquired a few books that you find interesting. Have yourself one of the attendees volunteer to take the leftovers to Goodwill or a used book store. Positive value is extracted by all of the attendees, through the removal of unwanted books and the acquisition of new, often unexpected books. Chances are high that one of the attendees (grad students?) will find it worth their while to take the books to a used book store for credit, removing that burden from you as well.
Donate the books to your favorite used bookstore -- if they give you a credit, that's okay; but a used bookstore has a better chance of getting the books into the hands of someone who appreciates them than a thrift store.
I went through similar struggles when giving away several boxes of books a couple of years ago. For me the most difficult part wasn't what I would characterize as "endowment effect" -- it was that all the books had specific memories attached to them and giving them away meant giving away (the most readily available triggers to) the memories.
(If I'd figured this out sooner I would have made a list of all the books before I gave them away, but I wasn't clever enough at the time.)
Patri, I have a few thousand books in the same status. I have several boxes to dispose of, but irrationally extreme frugality prevents me. I could purge my shelves of books that I will not read in the next five years, and the library will still have copies. Oh well, the marginal cost of storage space in my house approaches zero.
I have a related issue with needing to convince myself to pay for minor repairs around the house, rather than muddling through myself. I'm not sure if that is frugality or a desire for self-sufficiency.
It's not just money--for a lot of people, books are Special. That's why there's such a market in used books, and why people are willing to run low-end used book stores even though there isn't much money in it.
If your brother had had more initiative, he could have taken the book out of the trash and just put it back in the store. Or taken a lower effort route and left it by the trash in case someone wanted to pick it up.
James, I think the break down occurs in two places. First:
"I once bought a book that was shrink wrapped, walked outside the bookstore, unwrapped it, realized it wasn't something I wanted"
I feel that you should have been more careful in selecting the book in the first place. It wasn't rational to purchase something you could so easily have discerned to be worthless to you before the purchase. The shrink wrap doesn't change that for me -- I have never seen the cover of book so misleading that I couldn't get the same gist from it that I could get from a quick glance through the pages.
"The bookstore was going out of business, so I would have felt bad asking for my money back. In general, returning things in stores is a social interaction that has high negative utility for me. Even returning it without getting my money back would require me to make an explanation to the store clerk. No thanks."
This also doesn't make sense to me. There is no negative social utility here -- the clerk doesn't care. Whatever uncomfortability you felt was in your mind alone, and that is probably the least rational part of your account.
So you bought something irrationally, then irrationally invented a negative social utility in returning it when you had the opportunity. The result was wasted resources. I can see why people don't follow your reasoning.
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?
I don't know of any science behind it, but books are indeed special. I was voted "class bookworm" in high school--a great honor. When my shelves overflow, I give the excess to the library, which sells them for $1. It took me years to get to the point of being able to do that.
There are a couple of recent experimental papers in the American Economic Review (2005, 2007) by Charles Plott and Kathryn Zeiler in which they more or less claim that the endowment effect doesn't really exist. People can definitely come to be emotionally attached to things, but (they argue) the original experimental results that seemed to show that people placed extra value on things merely because they owned them aren't right.
Forget the "sacredness" of books - the sheer waste and folly of un-shrinkwrapping the thing and immediately tossing it in the garbage astounds me.
Unless you got an extraordinarily good deal on it, you also have a lot of expendable income to blow.
I guess I've noticed a similar effect. Once I fill all my available hard-drive space, I'm more likely to stop downloading/installing new things than to clear the crap off it.
This is very strange. I never thought I had invested books with any special sort of sacred status, but reading James' story gave me a very noticeable internal twinge. Upbringing, education, who knows why, but throwing a book away would feel odd to me. Irrational I know, but interesting nonetheless. If there's a silver lining to this bias, let's hope it's that we tend to hold symbols of information and learning in such high regard.
Depending on what you have on your bookshelves of course....
I'd never heard of the Kindle, it doesn't appear to be available in the UK. Looks very snazzy though. Does this mean we can't judge books by their cover art?
I don't understand the main post or several of the comments, which seem to imply that the number of books you possess would not be a monotonically increasing function of time. Isn't this a reductio ad absurdum?
Besides, what's the whole point of having a house (or apartment) if not to keep the rain off your books? If you owned a Kindle, why wouldn't you just live in a 7' x 7' box? And what about your bookcases - how will you fit one Kindle into all of them?
The whole concept of a Kindle is silly. It will never catch on.
I want to throw this book away but my brain won't let me do as I like, arrgh!
LG,
You have no idea what the book said on the outside. Why do you think you can judge the purchase as irrational? I would not have made the purchase myself, but I am probably more risk averse with money than James.
Above you said, "This also doesn't make sense to me. There is no negative social utility here -- the clerk doesn't care. Whatever uncomfortability you felt was in your mind alone, and that is probably the least rational part of your account."
Just because you see no negative utility doesn't mean that someone else doesn't. Yes it was in his mind. You can claim it's irrational, but that doesn't make it less real. Utility is within a person based on their personal values. Rationality is not relevant because emotions and values are simply not rational.
I think the reason that most people don't understand his action is the sunk cost fallacy; they believe that the book has value because he spent money on it. Also most people probably do not share his values.
My favorite way to dispose of unwanted books is to have a used book party. Invite over a dozen of your bookish friends, many of whom probably also have piles of books they no longer want to keep around. Everybody brings their books over, picks through the others, and generally interesting discussion ensues. Everybody goes home with a few to a lot of new books. Ideally, you are left with approximately the same size pile of books you started with, but have now acquired a few books that you find interesting. Have yourself one of the attendees volunteer to take the leftovers to Goodwill or a used book store. Positive value is extracted by all of the attendees, through the removal of unwanted books and the acquisition of new, often unexpected books. Chances are high that one of the attendees (grad students?) will find it worth their while to take the books to a used book store for credit, removing that burden from you as well.
Donate the books to your favorite used bookstore -- if they give you a credit, that's okay; but a used bookstore has a better chance of getting the books into the hands of someone who appreciates them than a thrift store.
Just sayin' . . .
I went through similar struggles when giving away several boxes of books a couple of years ago. For me the most difficult part wasn't what I would characterize as "endowment effect" -- it was that all the books had specific memories attached to them and giving them away meant giving away (the most readily available triggers to) the memories.
(If I'd figured this out sooner I would have made a list of all the books before I gave them away, but I wasn't clever enough at the time.)
Patri, I have a few thousand books in the same status. I have several boxes to dispose of, but irrationally extreme frugality prevents me. I could purge my shelves of books that I will not read in the next five years, and the library will still have copies. Oh well, the marginal cost of storage space in my house approaches zero.
I have a related issue with needing to convince myself to pay for minor repairs around the house, rather than muddling through myself. I'm not sure if that is frugality or a desire for self-sufficiency.
It's not just money--for a lot of people, books are Special. That's why there's such a market in used books, and why people are willing to run low-end used book stores even though there isn't much money in it.
If your brother had had more initiative, he could have taken the book out of the trash and just put it back in the store. Or taken a lower effort route and left it by the trash in case someone wanted to pick it up.
James, I think the break down occurs in two places. First:
"I once bought a book that was shrink wrapped, walked outside the bookstore, unwrapped it, realized it wasn't something I wanted"
I feel that you should have been more careful in selecting the book in the first place. It wasn't rational to purchase something you could so easily have discerned to be worthless to you before the purchase. The shrink wrap doesn't change that for me -- I have never seen the cover of book so misleading that I couldn't get the same gist from it that I could get from a quick glance through the pages.
"The bookstore was going out of business, so I would have felt bad asking for my money back. In general, returning things in stores is a social interaction that has high negative utility for me. Even returning it without getting my money back would require me to make an explanation to the store clerk. No thanks."
This also doesn't make sense to me. There is no negative social utility here -- the clerk doesn't care. Whatever uncomfortability you felt was in your mind alone, and that is probably the least rational part of your account.
So you bought something irrationally, then irrationally invented a negative social utility in returning it when you had the opportunity. The result was wasted resources. I can see why people don't follow your reasoning.