A psychological law of inertia and the illusion of loss aversion
David Gal argues that the anomalies loss aversion was introduced to explain, the risky bet premium, the endowment effect and status quo bias, involve a tradeoff between staying as one is and changing as well as one between losses and gains, and that a propensity towards the status quo is sufficient to explain them. He says two basic psychological principles, that motives drive behaviour and that preferences tend to be fuzzy and ill-defined, imply a robust and fundamental propensity of this sort. On that account a loss aversion principle is superfluous for explaining the phenomena.
David Gal argues that the anomalies loss aversion was introduced to explain, the risky bet premium, the endowment effect and status quo bias, involve a tradeoff between staying as one is and changing as well as one between losses and gains, and that a propensity towards the status quo is sufficient to explain them. He says two basic psychological principles, that motives drive behaviour and that preferences tend to be fuzzy and ill-defined, imply a robust and fundamental propensity of this sort. On that account a loss aversion principle is superfluous for explaining the phenomena.
Written from the abstract as shown on the OpenAlex record, read 2026-10-28.
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Gal, D. (2006). A psychological law of inertia and the illusion of loss aversion. Judgment and Decision Making, 1(1), 23-32. doi:10.1017/S1930297500000322 https://doi.org/10.1017/S1930297500000322