Loss aversion, one more victim to replication crisis? (no)

I saw somewhere a link to working paper by Gal & Rucker entitled The Loss of Loss Aversion: Will It Loom Larger Than Its Gain?, with the comment that loss aversion is one more psychological phenomenon not replicating. I was surprised by this claim because the mechanisms behind loss aversion, or something like it, are very much related to affect psychology. The context of replicability implies that loss aversion was never a thing, it was just a statistical fluke resulting from questionable research practices like social priming and Bem’s psi findings. But that’s not what the linked manuscript says. It’s a review that never actually questions whether such a phenomenon exists at all – rather it’s discussing the scope and an alternative conceptualization of the phenomenon. I’m not that familiar with this literature to assess whether the review really is impartial or whether it cherrypicks its findings (as it’s written quite obviously with a particular conclusion in mind, self-citing a lot), but clearly it should not be cited as evidence that loss aversion as a phenomenon is a result of QRPs. I’m a bit annoyed that the title and even the abstract plays like a clickbait and makes it easy to link the normal theoretical discussion about the limits of a phenomenon to the replicability issue.

In addition to enabling the misreading of this manuscript’s position in the literature, I was slightly miffed that it’s at least partly based on a fundamental misunderstanding of how the mind works. The authors describe a strong and a weak form of loss aversion in order to compare them to evidence, both of them in terms of it being a general, universal principle that can be applied to any human behavior: the strong form as absolute (that “one should not observe cases where gains have a propensity to be weighted more than losses of similar magnitude”, p.9), and the weak form as relative (“on average, one expects the data would largely reveal a greater impact of losses than of gains”, p.10). It may be that this is a feature in decision making research in general rather than a view held only by the authors, but from the point of view of affect psychology, it makes little sense. It’s a strawman, because I don’t think there is anything in psychology that can be considered a universal law like this, at the level of observable outcomes. Human mind does not work on “principles” or “laws” like this, because it is an immensely complex system of reacting, predicting, and self-correcting processes. There is no single process reaching through the whole of human mind, always (or even mostly, on average) producing the same results regardless of circumstances, because that would not be adaptive for the complex physical and social environment our mental machinery. And even if we focus on a very high level, it’s a dubious notion to begin with that all decision making would be governed by a single process translating all kinds of decisions into simple losses and gains.

I admit that I think some things as “principles” of human mind, and negativity bias (related but not identical to loss aversion) sounds like a good candidate, but it does not mean that at the level of observable outcomes, regardless of circumstances, we should see (absolutely or on average) a particular pattern of behavior. Rather, it means that some parts of the system tend to process information in certain ways, and in specific circumstances – where we can somehow control that specifically these processes are the ones influencing the outcomes the most – we can indeed see patterns in behavior.

That said, the alternative conceptualizations – such as propensity towards inaction or status quo – are interesting, and worth considering (assuming the review is not horribly biased) for anyone working with loss aversion. It is very likely true that an intuitively appealing conceptualization tends to be overgeneralized and that scientists easily persist even in face of evidence to the contrary.

 


Gal, D., & Rucker, D. (2017). The Loss of Loss Aversion: Will It Loom Larger Than Its Gain? (SSRN Scholarly Paper No. ID 3049660). Rochester, NY: Social Science Research Network. Retrieved on 12 Jul 2018 from https://papers.ssrn.com/abstract=3049660

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