I Love My Stuff, I’m Not Sure Why

The late comedian George Carlin made fun of our hoarding sensibilities in his famous discussion about our attachment to “stuff.”

Placing a higher value on something because you own it (the endowment effect) is simply a primordial survival instinct, reports The Economist. It’s an evolutionary adaptation that helped us when trade — and survival — were uncertain, but makes little sense in a modern free-market economy.

But irrational instincts make for great business. Self-storage companies are discovering a growing market in, as Carlin puts it, “a whole industry based on keeping an eye on your stuff.”

Making money off irrationality works in other industries as well.


Rob Walker

Hi Freakonomics,

After reading that same Economist piece, I was recently speculating about how to square the endowment effect with another well-documented psychological tendency: Adaptation. (As you know, tendency to overestimate how long the pleasure we associate with a new thing will last -- and to overestimate how long the misery associated with some negative event will last, though the latter isn't relevant here).

I’ve never seen research that reconciled these two concepts, and I wonder if such a study exists. Do we actually overvalue (per endowment effect) the junk in the closet (or the storage unit)? If we do, then why is forgotten and as a practical matter unenjoyed (per adaptation)?

Is there a point where the endowment effect fades, and adaptation kicks in? Do the two exist simultaneously?

I mused about all this at the below, but you might know of actual research...

Anyway, good job on the connection to George Carlin!

http://www.murketing.com/journal/?p=1338

--rw

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Roni

For years I worked in advertising trying to sell you stuff. sorry.

But now, I've swung to the other end of the spectrum. I live (with my wife and 3 cats-they're NOT stuff) in a NY studio apt, so we don't have space for stuff. And this has changed the way I feel about stuff, to the point that I have a Barnes&Noble gift card that I haven't used. I go there and can't find anything I really need...

And I'm extremely happy with the way I'm now. No debts, lots of time on my hands...

Joe P.

I think holding on to your personal possessions makes a lot of sense. There's a heavy, though hidden, cost involved in buying new things, selling old things, and adapting one's personal practices to new things. If it's something you will eventually need, it may well be easier to hold on to it rather than go through all of the transaction costs involved in keeping your assets liquid.

Jon Luke

And from my understanding, Buddhism as a school of thought/religion was founded mostly on the notion of being attached to "stuff" (which is always impermanent) is the source of most of our woes.

DH Wall

Humans have had stuff since before the hunter-gatherer era but things only started to go downhill during the Pet Rock era of the 1970s.

James

I don't see what's so irrational about it. Surely it's better to just keep the things you have rather than spend all your time trying to get a good deal for them.

Matthew

It is interesting to see this discussion as I read the Broken Window Fallacy for the first time yesterday. Just as the person whose window was broken loses the flexibility of spending his money, so too does the person without certain stuff lose the flexibility of his efforts. There is a certain minimum amount of stuff the average person would want to have related to basic needs; food, clothing, shelter. While there is, of course, an opportunity cost involved with the storage of stuff the possession of stuff makes for a life that "flows" better. Knowing that when I leave work each day I can go home, cook the food in my house, with the pans/utensils I have, sit down and watch a movie before going to bed allows me to better focus on my activities during the day. While there is, of course, a tendency of many people to measure worth by counting up stuff, the security of knowing that the basics of food, clothing and shelter have been met must have a value.

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Mike B

Nice to see the Wikipedia link for the explanation of one of the obscure economics terms. I have noticed that many of the other contributors to this blog tend to avoid links to wikiepdia.

Michael F. Martin

Economists and psychologists definitely need to collaborate more. But at this point I think the whole bounded rationality stuff has gone too far.

For example, while there is no doubt a path-dependent pattern in time for demand for some goods, most of that path-dependence seems to cancel out over long-time scales and large populations -- i.e., while the endowment effect may be good psychology, it's not necessarily useful economics. Much of it could be explained as good-ole-fashioned consumer surplus.

Rather than peeling back at the hypothesis of rationality, I'd like to see us find another empirical hypothesis like rationality, which is useful in describing large populations over long-time periods.

http://brokensymmetry.typepad.com/broken_symmetry/2008/06/thomas-schellin.html

world traveler

Space is a cost of "stuff" but I think the biggest cost is security.

But the security would be a complementary good (it's been a while since econ 101). The more stuff a person acquires, the more security he has to purchase. It starts with dead-bolts and ends with private armies of security guards. While I'm barely at the dead-bolt end of the spectrum, I've decided that the cost of more security is higher than the cost of losing my DVD player (which costs less than rekeying all my lock professionally).

Don't give out my address - but I rarely even use the dead-bolt. I have peace of mind that comes from not worrying about the stuff. And, apart from my insured house, can replace my "stuff" from cash reserves.

dan p

I am reminded of a Frank Zappa quote, "Communism didn't work because people like to own stuff."

Brooke

It's a great survival instinct, until you realize that your apartment is too small for two people's "stuff" once your boyfriend moves in. Then comes the delicate negotiations over which items can be discarded for the mutual good.

It always amazes me how many bags of "stuff" I cart out of my dwelling when I finally do go through my possessions. I have too much of it, but I can't live without it all on some level.

Jake

And to the extent we realize and fight this tendency, we'll be better off, as Paul Graham discusses.

-Jake

Thomas

It would be interesting to make calculations on the opportunity cost of holding on to "stuff". Owning stuff means that we need space for it, a.k.a. a larger home. Therefore part of the cost of stuff is the space it takes in our home (the value of the square feet the stuff occupies).

I expect that for some rarely used stuff it would actually become cheaper to just buy a new one every time we need it and save space.