Endowment Effect

It can be hard for us to imagine things being any different than they are right now. The future is so abstract and what we have now is so concrete. The abstractness of the what is to come can lead us to miss-value the future. We can succumb to wishful thinking and shoot too high in our estimations, or we can become cynical and write off legitimate possibilities. 

For however hard it is to value the future, though, valuing what we have here and now is just as hard. What we have in front of us carries a lot of weight in our psyche, mostly because it is right in front of us.

What makes valuing what we presently posses so difficult? Economists point to something called the endowment effect. 

Here's a common experiment. Let's say that a group of people are gathered together, and half of the group are given a gift. Nothing too valuable - we'll use a coffee mug for our purposes, but it could be any trinket. The ones given the gift are then allowed to sell the item to the other gift-less members of the group so long as they can agree upon a price. 

One would think that taking a coffee mug, or some other such thing, and turning it into a quick buck would make sense. After all, you didn't come into the group with a coffee mug, but you could leave with a few extra dollars. This is not a special mug in any way on its own. It's an ordinary mug, except that it was given to you and not to someone else. 

That is not what happens most of the time though. Time after time, in experiments like this one, the people endowed with coffee mug typically require twice as much as the those without a mug are willing to pay.

This is the endowment effect.* 

The endowment effect, among other things, makes the status quo quite sticky. It's hard to give up what we have, even when giving it up makes sense. 

Therefore, if anyone is in Christ, he is a new creation. The old has passed away; behold, the new has come.

1 Corinthians 5:17, ESV

Newness is a major theme of Paul's writing, and a fundamental principle of Christianity. Besides the passage above, here are a few other passages to consider:

• Romans 12:2 - Be transformed by the renewing of your mind

• 2 Corinthians 4:16 - Though outwardly we are wasting away, inwardly we are being renewed

• Ephesians 4:24 - Put on the new self, which is created in righteousness and holiness

• Colossians 3:10 - Put on the new self, which is renewed in knowledge after the image if its creator

• Titus 3:5 - We are saved through the washing of rebirth and renewal by the Holy Spirit

We see the themes quite clearly: transformation; renewal; rebirth.

All of this newness presents a challenge which stems from our aversion to loss. The pain of loss we feel from giving up something is front and center, while the gains which may come from change are not only not guaranteed, they are off in the murky future somewhere.

Its loss aversion which really drives the endowment effect. The concreteness of what we have now can trump the abstractness of potential future gain. The status quo looks very valuable in the moment. 

The status quo, however, can never lead us into the fullness of following God.

The life of a Christian is one of maturing, growing, and changing. It's us being transformed by the Holy Spirit and going from glory to glory (2 Corinthians 3:18). The next glory will probably not look exactly like the current glory. Certainly each point of growth builds on top of the last one, but this does not change the fact that each time God moves us, we are changed. The new comes and takes the place of the old. There is no other way. 

Let us not hang too tightly to what we have in front of us. Not because we're not content, and not because we don't appreciate what we have. 

Rather, because we follow a God who still creates, and he is not finished with us. 

*Nofsinger, J; The Psychology of Investing. Prentice Hall, 2011. Pg 38