Loss Aversion, Expectation, Entitlement, and the Story of Jobby Will McDavid on Aug 7, 2012 • 4:09 pm 2 Comments
We’ve discussed loss aversion frequently – the behavioral psychology idea that losses hurt more than gains – and there’s a curious extension of it called anchoring. Picture this scenario: someone doubles the size of an investment in the stock market over the span of ten years, and then she loses a quarter of it in a day. One would imagine that she wouldn’t have a very charitable picture towards the market, thinking she’d gotten the short end of the stick in her investment. These are real reactions too; psych-savvy investors frequently try to use human irrationalities like this to make stock decisions.
The reason our investor in the above example felt so down and out is that we tend to view life’s events in relation to some reference point, or anchor. In the long-term view, she had made good money from her investments, gotten lucky even. In the short term, however, all she sees is the massive loss in that one day.
Consider some studies done on people’s ability to guess the number of beans in a jelly-bean jar. If I tell you before you guess that I once had a jar with three thousand beans in my attic, your guess will be influenced by that and err on the high side (assuming there’s less than three thousand in the jar) – even though my information has nothing to do with the jar you’re guessing from. These studies have been published frequently in psychology and economics journals, and our memories of past net worth, strength of relationships, job prestige, or good times serve as countless reference points in how we evaluate the present.
We see this too in life. Someone gets a good break – a great job, a house, successful children, you name it – and this is often a gracious gift from God (or Fate, or Life) to them. Once we have it so good, however, we must maintain it: the gift goes from grace to Law, and we extrapolate good fortune and find fate cruel or ourselves horribly inadequate whenever a departure from those circumstances occurs. Think of the Wall Street executive’s reaction when he gets passed over for promotion, or the straight-A student’s dismay at finding the occasional B on a report card. Our appraisal of circumstances assumes our absolute best as the reference point, and we demand the same thing from ourselves and from life. Or, on the other hand, consider a first-time Olympian’s reaction to winning an unexpected gold versus the many who sob through their awards ceremony for silver. Swimmer Nathan Adrian hadn’t been expecting a gold – you could say his reference point was probably no medals at all – and so we see exuberance.
This whole idea of anchoring, funnily enough, finds expression in the Bible. In its most acute tale of (Old Testament) suffering, Job finds that we deserve nothing – and this is the anchor from which all life’s events should be appraised. His friends see Job’s suffering and blame him – of course he brought it on himself! – because the alternative is that God isn’t just, and this is unthinkable. Things got worse, so Job himself must have caused it.
And yet Job instead finds himself entitled to nothing, so that all is a gift. We see his reference point: “Naked I was born, and naked I shall return” – and everything in between, everything added on top of that nakedness and destitution, seems to be a blessing, a grace. Kierkegaard explains it as follows:
“At the moment when the Lord took everything, he did not say first, ‘The Lord took,’ but he said first ‘The Lord gave’…the loss of everything first made him thankful to the Lord that He had given him all the blessings that He now took from him…[They did] not becomes less beautiful to him because [they] were taken away, nor more beautiful, but still beautiful as before, beautiful the Lord gave it, and what might now seem more beautiful to him, was not the gift but the goodness of God”
So let’s just go be more thankful to God! Unfortunately this sentiment does little to console the true sufferer, and Kierkegaard’s pietism here rings true, but still a little hollow. The most serious sufferings probably resonate more with Job’s anguished wailings than his theologically responsible “The Lord gave,” but in smaller matters it can be worth remembering that our suffering can be correlated with our feelings of entitlement to things the Lord has given – in short, making grace into the Law, claiming God’s gifts as ours by right. While we can’t just go out and make ourselves be more grateful, the anthropology of loss aversion can, in some small way, shed light on the problem.
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