Wednesday, April 25, 2007

The psychology of loss

Which would you choose?

(a) You will surely suffer a loss of $890 OR
(b) You have a 90% chance of suffering a loss of $1,000 and a 10% chance of suffering no loss.
Ross Gittins has written a fascinating article in the SMH reporting on some psychological research suggesting reasons why the advice of hawks is given more weight than that of doves.

9 comments:

Anthony said...

I like the article, but I'm not sure I like the question. I might be psychologically average, but it seems to me to be a choice between coughing up big time, or paying $10 for a chance at getting off. I'd risk the extra $10 - or even $110 - I guess. Statistics be damned; Murphy's Law will win in the end anyway.

Part of the problem would seem to be that the premium for war seems more attractive than it is. It seems like it's only a small extra risk (say $10), when the reality is, it's huge (say $millions)...

Drew said...

Before reading the article, I opted for option a), having no idea of the context...

Great article. Thanks for the link.

Martin Kemp said...

I've always felt that the Hawk/Dove thing is a bit of a false dichotomy ... I imagine that the best strategy for the long term would be one which has both elements present. The simplistic consequentialism with which most of our culture works with has led to people falling into one camp or another...but if we think outside the consequentialist box we can start to see things differently.

antman said...

As I was reading the Gittins article it occurred to me that this theory fits nicely with the theological war going on at the moment between a certain Bishop of Durham and his Oak Hill opponents. It seems to me that evangelicals are often 'hawks' when it comes to theological battle, and now that the lines are drawn, the 'hawks' on each side are going to keep the war alive!

ps (I'm not saying that there aren't significant differences, just that the 'hawks' and 'doves' theory seems to be at play right now in the very real world of the New Perspective theological battle - something Wright's article on the atonement that Byron pointed out brought to the front of my mind).

pps check out my new blog - yes I've succumbed - it will be exegetically minded, but you theologians might like a cyberworld holiday in different territory some time.

Adrian said...

Hmm... it would be interesting to read the original (scholarly) article as I wonder if people are a simple as the "experiment" Byron has picked from Ross Gittens article suggests?

What if the risk was not a $110 difference but an $1100 or $11000 or $110000 etc?

michael jensen said...

if hawks and doves are to simple a polarity, what about:

owls? vultures? parakeets? emus?

Rachel said...

I love Ross Gittens. he makes the world feel like a better place especially when I see Miranda Divine's name near by.

byron smith said...

I wonder whether this research mightn't also suggest some insights into the psychology of climate change denial. Better to 'gamble' on the small chance of no loss (i.e. the IPCC are wrong/have seriously over-estimated the problem) and risk a larger loss than accept that we've already lost something and pay for mitigation and the avoidance of further effects.

byron smith said...

Joseph Stiglitz and Linda Bilmes: The three trillion dollar war. For comparison, WWII cost America $5 trillion in inflation-adjusted dollars.