Money Illusion

Shafir, Eldar; Diamond, Peter A.; Tversky, Amos

doi:10.1162/003355397555208

Cited by 670 publications

(433 citation statements)

References 23 publications

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“…Fehr and Tyran (2001) show that money illusion could be quite substantial and long lasting, not because of individual mistakes, but because some people behave differently in anticipation of money illusion by others. These findings are also reminiscent of the findings by Shafir, Diamond, and Tversky (1997), who show that although most people can distinguish between nominal and real monetary values, they still tend to prefer a higher nominal value. This paper shows that the same can be said about the perception of likelihood and choices in the absence of "money."…”

Section: Introductionsupporting

confidence: 73%

Nominal increases and the perception of likelihood

Wong

2007

Economics Letters

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Section: Introductionsupporting

confidence: 73%

Nominal increases and the perception of likelihood

Wong

2007

Economics Letters

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“…Some people are unwilling to destroy a forest to promote "economic" gain, but they are willing to destroy it to prevent a loss. Of course, what counts as a gain or loss is relative and is easily manipulated (e.g., Shafir, Diamond, & Tversky, 1997 It is not clear, however, whether the 60% difference represents truly conflicting answers. People may think that free speech does not imply the right to speak on public television, or in any particular place, as long as some avenue of expression is available.…”

mentioning

confidence: 99%

How serious are expressions of protected values?

Baron¹,

Leshner²

2000

Journal of Experimental Psychology: Applied

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People think that some things that they value should be protected from trade-offs with other things. For example, people think that no economic gain is great enough to justify clear-cutting old-growth forest. The authors probed the stability of these protected values (PVs) in several ways. Subjects were asked to think of counterexamples, and this had some effect on PVs. Subjects were then asked how they would resolve conflicts between 2 PVs. Resolutions did not differ from those between other values, but subjects tended to feel that conflicts between PVs did not occur in reality. Despite people's claims that PVs are unchanged by variation in quantity, expression of PVs was reduced when the magnitude or probability of the violation of a PV was smaller. In summary, PVs appear to be labile and amenable to challenge. Despite earlier concerns, apparent PVs may not always preclude the use of valuation measures in cost-effectiveness analysis or negotiated agreement on controversial issues. People think that some of their values are protected from tradeoffs with other values (Baron & Spranca, 1997; Tetlock, Lemer, & Peterson, 1996). Many of these values concern natural resources, such as species and pristine ecosystems. People with protected values (PVs) for these things do not think they should be sacrificed for any compensating benefit, no matter how small the sacrifice or how large the benefit. The term value here is used to mean utility, that is, the measure of desirability that decisions are meant to increase (Baron, 2000). In an economic sense, when values are protected, the marginal rate at which one good can substitute for another is infinite. For example, no amount of money can substitute for a type of environmental decline. Several researchers have noted that PVs cause problems for quantitative elicitation of values, as is done in cost-benefit analysis or decision analysis (

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“…On the one hand, several welldesigned psychological experiments at the individual level show a convincing bias towards nominal rather than real magnitudes, which according to these findings results in considerable inertia (see Shafir et al (1997);Fehr and Tyran (1997)). On the other hand, recent experience also appears to provide clear-cut evidence for the existence of money illusion at the individual and aggregate levels.…”

Section: Money Illusion: Neglected In Research and Policymentioning

confidence: 82%