The New Yorker:
To commit to a New Year’s resolution is to gamble. Gym memberships and weight-loss programs are expensive, but they’re good investments if they bring health and happiness. Unfortunately, as I learned eight years ago, people don’t take the prospect of losing money lightly. In the summer of 2005, I interviewed dozens of habitual gamblers in Atlantic City. I waited as they stumbled from the casino onto the boardwalk, squinting into the sunshine, and asked each one a string of questions about their gambling beliefs. Many believed that a roulette wheel could become “stuck” on red or black (known as the hot-hand fallacy). Others felt that the same roulette wheel was “due” to spin red after a string of black spins (the gambler’s fallacy). The most consistent response came when I asked some of the gamblers whether they would consider playing a simple, hypothetical game: I would toss a coin. If it came up heads, I would give them ten dollars; if it came up tails, they would give me ten dollars. This is a perfectly fair gamble—fairer than many casino games, which are designed to favor the house—but the appeal of winning ten dollars wasn’t enough to overcome the potential pain of losing ten dollars. Almost all of them said that they would prefer not to play.
Almost three decades have passed since the psychologists Daniel Kahneman and Amos Tversky first demonstrated loss aversion. Since then, other researchers have shown that loss aversion drives real, long-term behavior beyond hypothetical lab experiments. In one field experiment, four economists offered to reward Chicago schoolteachers according to how much their students’ test scores improved during the 2010-2011 academic year.
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