Wednesday, July 25, 2012

Ch 2: Loss Aversion: Or, the Upside of Going to Bed Angry

In lab experiments, economists have determined that humans hate losing so much that the fear often causes us to do strange and destructive things.  Hence, you have stockbrokers who throw good money after bad hoping to recoup losses or that stocks will rebound.  But it turns out we hate losing twice a badly as we like winning, so "loss aversion" is a powerful force in human behavior, particularly relationships.

Loss aversion causes us to act irrationally, including changing our minds on a whim, making rash decisions, choosing lesser short-term gains over greater long-term gains, feeling overconfident, and of course fearing change.  In our marriages, it causes us to stay up all night to win a fight, futily trying to convince the other to see things our way.  It urges us to dig in our heels through pride or give the other the silent treatment. And eventually, instead of cutting our losses, this vicious cycle leads to compounding loss over time.

Solution: Sleep on it.  

In other words, go to bed angry.  Get a good night's rest and return to the subject later.  Invoke the "24-hour rule" in which you agree to shelve the discussion and return within 24 hours.  Things usually seem much better in the morning.

In addition to loss aversion, humans tend to value there own stuff irrationally.  Economists refer to this as "the endowment effect."  We endow things we own with sentimental meaning that aren't supported by the market.  The example the book gives is of a wife who wouldn't give up a natty old recliner because it represented the freedom of her single days. But the principle of loss aversion gets to the heart of why compromise is hard--we hate to lose.

Solution: Reframing

Recasting losses in terms of gains (or vice versa) can often change people's perspective on a conflict.  The wife above might think to herself, "Am I losing a La-Z-Boy or gaining a happy home?  Am I losing something sentimental or gaining a chance to buy something beautiful?" (53).  Our willingness to compromise often hinges on whether we see our action as resulting in a loss or a gain.

A phenomenon that feeds loss aversion in relationships is nostalgia and the rose-colored glasses of memory (my phrasing, ha).  We often look longingly back at the honeymoon, new-relationship-energy period of our relationship and see the present as loss. This problem in economic terms is called "status quo bias." This bias causes us to "strongly prefer the known and familiar over the unknown and unfamiliar.  Any change means losing, and that's something our monkey minds aren't very good at" (61).

Solution: Focus on the Present

Wait, they didn't write that.  But I have to mention it here, since it's implied, and I wouldn't be a Buddhist worth his salt if I didn't point out that focus on the past causes suffering because we want something that no longer exists.  In Zen, the future too is a fiction, but for these authors, it's a useful one because it can be a useful incentive (but more on that in Ch 4).  Suffice it to say here that re-imagining the future can help us reframe our status quo bias.  Instead of thinking about how the fire is gone out of your sex life, focus on what your relationship has gained in terms of intimacy, knowledge, and commitment.  Let the past go, no matter how great you think it was (and it probably wasn't that great anyway).

Solution: Active Decision-Making

Obsessing about a past that has disappeared can not only get relationships in a rut but can create problems that don't exist.  "Take an active role in the decisions that affect your life," Paula and Jenny write, "rather than sitting back and letting those call the shots for you" (65).  Passive decision making, just allowing things to happen, is what causes ruts and makes us miss opportunities for gain.

Reframing and focusing on the present are both active decisions that can help you control your aversion to loss, but there are others.  If you aren't having enough sex, then decide to have more sex.  If you sex life is in a boring rut, spice things up.  If you think that happy days are all in the past, sit down with your spouse and write out a comparison like this:
From pg. 67


The authors rightly point out that the list on the right isn't comprised of losses--those items are merely different--we apply the value of better or worse (pun) to them based on what?  Hollywood?  And this kind of listing can lead to other active decisions, like the choice to "resurrect" some things from the list on the right.






Chapter 1: Division of Labor


 Many marriages founder on the rocks of how household chores are divided--it's often third on the list of what couples argue about behind sex and money.  Use the theory of comparative advantage to help decide whoshould do what around the house. “Comparative advantage” says that “it’s not efficient for you to take onevery single task you’re good at, only those tasks you’re relatively better atcompared with other tasks" (6).

Listing tasks and time (17).



Create a list of all household chores and compare who isfaster at doing it.  Even if youare slower at everything, it is more efficient for you to do the thing yourfastest at and let your spouse do the thing your slowest at.  The more efficient you are atspecializing your labor, the more leisure time you’ll have to hang outtogether.
How comparative advantage saves time (18).

When an economy is failing, like a marriage, economists“don’t blame the market, [they usually] blame lack of a market” (24). When changes happen in your life (eg, kids) you have to re-evaluate yourdivision of labor.

By efficiency, the authors mean “Pareto efficiency,” asituation in which “nobody can be made better off without somebody else beingmade worse off” (27).  This oftenmeans that chores aren’t divided 50/50; it’s up to each couple to determine,through open discussion of labor, when things are Pareto efficient.  Until you achieve this, you’re marriageis screwed.

Of course, Pareto efficiency and comparative advantage arethe only factors—things work better when each has an incentive to do something,namely, that they like the chore. In a marriage, the incentives always involve the spouse caring about the results of the labor.

Because life is always change, you sometimes have to investin new specializations—try new tasks—in order to achieve comparative advantage.

Tuesday, July 24, 2012

Spousonomics, by Paula Szuchman and Jenny Anderson

OK, so we're not exactly reading this book together, but I'm hoping that my postings may entice you to.  If not, at least you can get some of the info from it, as I wanted to make this outline anyway for my own benefit.

I’ll start by giving a summary of the book while offering a brief analysis and evaluation.  In short, I’ve been drawn into to this book not just for what it says about relationships but for the unique way it offers wisdom about human behavior.

Spousonomics, by two journalists who cover economic issues for WSJ and NYT, applies principles they have learned about economics to marital relationships.  They define marital relationships as any committed relationship, but it is clear that they are talking about people who have promised fidelity to each other, which covers most couples in the US.  Furthermore, they are clearly writing to an upper-middle class, urban (eg NY) audience, judging by the kinds of details and examples they provide.  Fortunately, this bias includes you and me, bourgeois as we are, but it makes sense because this group is probably as invested in (and have benefited the most from) the capitalist principles put forth in the book as anyone.  Given all of that, it’s one of the most rational and helpful books on marriage that I’ve come across, and it is mercifully free of much of the men-Mars, women-Venus stereotypes that pervade the genre.

In my next few posts, I'll be breaking the book down, chapter by chapter, to provide what I see as the main points and concepts of the book.