The Life-Changing Magic of the Endowment Effect

It’s 9 pm on a Sunday, and all of the lights are on in our 850 square foot apartment. Sprawled across the couches and coffee table are notebooks — not the cheap, Walmart ones that never let you tear a page out cleanly; I’m talking about that three-subject, folders-in-the-dividers, spiral you couldn’t wait to buy in every color.

As I look around feeling a bit overwhelmed, a voice appears:

“What are all of these?”

“They’re my notebooks from undergrad,” I respond, somewhat sheepishly.

“Why do you still have them?” he asks half-skeptically.

“Because I’m getting ready to go to grad school, and they may be useful.” As the words come out, I hear the over-persuasive tone of my voice.

“Oh, you mean they still have some blank pages left in them, so you don’t have to buy new ones?” he asks, nodding as if he understands my hesitation.

“No, not exactly...”

“Oh, so you’re keeping them because there’s a lot of overlap between the readings and stuff you’re studying in grad school?”

“Well, no, not really… it’s a completely different program — ”

“I don’t get it,” he interrupts. “What are you gonna use them for?”

I feel myself starting to get defensive. “I thought I might be able to read through them.. for some ideas or inspiration for when I start school again.”

He looks confused and thinks to himself for a moment before responding somewhat quietly; “But weren’t these from like, ten years ago..?”

As I look down at my faded notes on Richard Florida’s predictions on The Rise of the Creative Class and contemplations around Michel Foucault’s panopticon, I feel my attachment grow deeper. I remember the last time I was here, staring down at pages full of questions and ideas with doodles in the margins. It was just a couple years earlier when I had moved into this apartment and thought to declutter some of my no-longer-used things.

“Does it spark joy?”

Marie Kondo has recently taken the world by storm. From her book — which sold over 10 million copies in 42 countries — to her hit Netflix series, the KonMari method promotes decluttering and assessing each of your belongings through the question, “does it spark joy?” The tidying method suggests working through categories as opposed to rooms or locations in your home, keeping only those items that speak to the heart.

Tidying Up with Marie Kondo examines our tendency towards attachment and sentimentality. She acknowledges that letting go of things that no longer serve us is an emotional process.

“People around the world have been drawn to this philosophy not only due to its effectiveness but also because it places great importance on being mindful, introspective, and forward-looking.”

And the philosophy is working: In the wake of the show’s release, “donations to Goodwill stores in the Washington D.C. area were up by 66%, and Goodwill reported a 10%-20% increase in donations nationwide for the year, part of which is attributed to the show.”

As a self-proclaimed sentimentalist, I am terrible at decluttering even though I try to do it often. And though attachment and sentiment are a part of human nature, behavioral economics has a different explanation for my poor decluttering habits.

The Endowment Effect

In 2017, Richard Thaler won the Nobel Prize for his contributions to behavioral economics. In his research and social experiments, he identified the now-popular cognitive bias termed the “endowment effect,” which reasons that people tend to value things more highly simply because they own them. The endowment effect comments on the irrationality of our attachment to items regardless of their market value. Driven by the fear, the bias identifies that people tend to focus on what they could lose as opposed to gain when it comes to ownership.

Each year, I pull out my undergraduate notebooks. And though the stack has now dwindled to a mere two spirals, I immediately find myself thinking, “I might use these someday,” or “what if I don’t remember all of these ideas I had.” So next time, maybe instead of blaming attachment and sentimentality, I can combat the endowment effect on my cognition and focus on what I may gain: more space in my drawers, a fresh perspective on the relevant content I’m now studying, and maybe even a spark of joy.

Sources:

Koncius, Jura (January 11, 2019). “The tidying tide: Marie Kondo effect hits sock drawers and consignment stores”. Washington Post. Retrieved January 11, 2019.

Lowe, Peggy (February 27, 2019). “Marie Kondo may be a boon to the resale industry”. Marketplace. Retrieved March 1, 2019.

Kahneman, Daniel; Knetsch, Jack; Thaler, Richard (1991). “The Endowment Effect, Loss Aversion, and Status Quo Bias”. Journal of Economic Perspectives. 5 (1): 193–206