Economics Questions

Re: Mises Daily: "Mystery" of the Endowment effect

Bert — Thu, 29 Dec 2011 08:15:26 GMT

These experts are puzzled that an individual may value their own property over someone elses, and may value a piece a property more if they had ownership in it. These experts apparently have never examined humans in their daily lives performing daily tasks.

Of course, I had a similar feeling when I read numerous economists saying that marginal utility gained by a dollar is much less to a rich person than to a poor person because the rich person has more.

This is one of those things where I have to ask what's rich and what's poor? Someone can make $40+ thousand a year and then have the IRS bust and charge them $14 thousand in taxes for doing under the table side jobs. This person may (through time) be considered "rich" to someone who's working a min wage job, but living rent free, who may be considered "poor", but both living within their means. The straw man is that "rich" brings the thought of millionaires in monocles and "poor" are destitute wage slaves, and those are the only two classes you can choose from.

The irony in that statement is they would never apply that same theory of value to increasing the money supply (well, there's more, so it has less value - no, this only applies to rich people and their savings).

Re: Mises Daily: "Mystery" of the Endowment effect

DanielMuff — Thu, 29 Dec 2011 07:13:35 GMT

Wheylous:
Are many mainstream economists really that blind?

I gets tricky when one tries to determine whether the other is a true believer or simply being deceitful.

Mises Daily: "Mystery" of the Endowment effect

Wheylous — Thu, 29 Dec 2011 05:17:14 GMT

From http://mises.org/daily/5839/The-Mystery-of-the-Endowment-Effect:

economists are puzzled by phenomena like the "endowment effect."

a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own than objects that they do not. In one experiment, people demanded a higher price for a coffee mug that had been given to them but put a lower price on one they did not yet own.

My reaction: Really? Are economists truly puzzled by this? Am I missing some straw man that the author is building? If mainstream economics is stumped by this oh-so-very-basic truth behind subjective valuation and theory of trade, then I do not hold much hope for anything.

Of course, I had a similar feeling when I read numerous economists saying that marginal utility gained by a dollar is much less to a rich person than to a poor person because the rich person has more (a bastardization of even the mathematics behind the impossible cardinal utility comparison due to lack of knowledge of the y-intercept, slope, or even demand function itself).

Are many mainstream economists really that blind?