Tag Archives: Cost

To the bitter end: primates can also fall into the sunken cost fallacy

People are notorious for not wanting to waste our time and effort — to the point that we’re willing to sink more of both into an endeavor we’re already on even if it is obviously futile. Our primate relatives seem to be the same.

Image credits Dimitri Houtteman.

Our reluctance to give something up after we’ve worked hard to get it, or otherwise invested a lot of time of effort in, is known as the “sunken cost” fallacy. In essence, the more effort you’ve put into something, the likelier you are to keep working on it even if you know it’s for naught.

It hails from our very distant past, in our ancestors and the ancestors of the human race. It’s a mechanism that makes sure our brains won’t give things up easily and instead wait for a return on investment — giving up too early might mean wasted energy, which could very well mean death in the wild. But there are many scenarios in modern times when the sunken cost fallacy is a net drain on our achievements and quality of life.

New research comes to help us understand the roots of the sunken cost fallacy, finding that two of our related species — capuchin monkeys and rhesus macaques — are also susceptible to this behavior.

Money business

“The epitome of the sunk cost is I’ve invested so much in this, I’m just going to keep going,” said Professor Sarah F. Brosnan from the Georgia State University (GSU), the paper’s senior author.

The team believes there are two factors that work together to generate the sunk-cost fallacy. The first is an evolutionary mechanism meant to help us balance costs and benefits. The second factor is uncertainty regarding the outcome: it might work, so why not keep at it?

They tested this hypothesis through a series of experiments with capuchin monkeys and rhesus macaques, finding that both are susceptible to the sunk cost fallacy, especially so when they’re uncertain about the outcome.

Housed at the GSU’s Language Research Center, the primates have both indoor and outdoor areas available to them, either for play or to take place in voluntary, non-invasive cognitive and behavioral research Brosnan says.

In the study 26 capuchin monkeys and 7 rhesus macaques played a simple video game. Through a joystick, they could move a cursor onto a target. If they successfully hovered it over the target as it moved, they would hear a sound and get a treat. If they failed in the task, they wouldn’t get a reward and the game would restart. After they got the hang of it, the team would test the primates on rounds of either 1, 3 or 7 seconds.

“Monkeys have really quick reaction times on these games,” said Brosnan, “so one second to them is actually a long time.”

Most rounds actually only lasted for 1 second, the team notes. From a purely practical point of view, this means that “if you didn’t get a reward after that, it was actually better to quit and start a new round”, according to Brosnan. That’s not what the animals did, however.

“They persisted 5 to 7 times longer than was optimal, and the longer they had already tried, the more likely they were to complete the entire task.”

Uncertainty was a powerful driver here, as the monkeys were less likely to continue the experiment if they got a signal that additional time and effort was required (though they wouldn’t always stop). They see this as an indication that the sunken cost fallacy is a product of evolution, and it’s deeply rooted in our developmental history (since these species are relatively distantly related to us). An animal’s ability to hunt, forage for food, or to wait for an appropriate social context would benefit from such a mechanism.

It also shows that it’s not a product of our higher mental abilities such as rationalization, from our concern to maintain our public image as someone reliable and capable, or anything similar. These factors likely help flesh the fallacy out, but our relatives can’t boast them to the same extent as we do.

Finally, the team notes that their findings show why tenacity isn’t always a virtue. Understanding the mechanisms that tug on our motivations from the shadows may then help us lead better, more fulfilling lives by focusing on what really matters to us.

“We’re predisposed to keep trying,” Brosnan said. “And when we find ourselves sticking with things, we should also be a little reflective. Do I have a good reason to keep trying? Or should I leave with no reward, because it will save me more in the long run? That’s really hard to do. But hopefully we can use our cognitive abilities to help us overcome the emotional heartache of occasional sunk costs.”

The paper “Capuchin and rhesus monkeys show sunk cost effects in a psychomotor task” has been published in the journal Scientific Reports.

Better diets could save billions in U.S. health care costs

Healthier diets could save the US around $50 billion in healthcare costs annually, according to a new study.

Image credits Ylanite Koppens.

Unhealthy diets are a leading cause of poor health, as they promote the development of cardiometabolic diseases (CMDs) such as heart disease, stroke, and type 2 diabetes. A new study led by Brigham and Women’s Hospital researchers estimates that unhealthy diets can account for 45% of all CMD-related deaths in the US, leading to a national healthcare burden of around $50 billion nationally.

Fooding the bill

“There is a lot to be gained in terms of reducing risk and cost associated with heart disease, stroke, and diabetes by making relatively simple changes to one’s diet,” said corresponding author Thomas Gaziano, MD, MSc, of the Division of Cardiovascular Medicine at the Brigham. “Our study indicates that the foods we purchase at the grocery store can have a big impact. I was surprised to see a reduction of as much as 20 percent of the costs associated with these cardiometabolic diseases.”

In collaboration with researchers at the Friedman School of Nutrition Science and Policy at Tufts University, the team looked at the impact of 10 dietary factors — fruits, vegetables, nuts/seeds, whole grains, unprocessed red meats, processed meats, sugar-sweetened beverages, polyunsaturated fats, seafood omega-3 fats, and sodium — on one’s diet on annual CMD-related health costs.

Towards this end, they used data from the National Health and Nutrition Examination Survey (NHANES), to create a representative U.S. population sample of individuals aged between 35 and 85 years old. Then, using a model they developed, the team analyzed how the individual risk of CMDs shift based on the dietary patterns of respondents to the NHANES study. Finally, they calculated what the overall CMD-related costs would be if everyone followed an optimal diet in relation to the 10 factors.

They conclude that suboptimal diets cost around $301 per person per year, for a total of over $50 billion nationally. The team explains that this sum represents 18% of all heart disease, stroke and type 2 diabetes costs in the United States. Costs were highest for those with Medicare ($481/person) and those who were eligible for both Medicare and Medicaid ($536/person).

The consumption of processed meats and low consumption of nuts, seeds, and omega-3 fat foodstuffs (such as seafood) were the highest drivers of CMD risks and additional costs, the team explains.

“We have accumulating evidence […] to support policy changes focused on improving health at a population level. One driver for those changes is identifying the exorbitant economic burden associated with chronic disease caused by our poor diets,” said co-senior author Renata Micha of the Friedman School of Nutrition Science and Policy at Tufts.

“This study provides additional evidence that those costs are unacceptable. While individuals can and do make changes, we need innovative new solutions — incorporating policy makers, the agricultural and food industry, healthcare organizations, and advocacy/non-profit organizations — to implement changes to improve the health of all Americans.”

The results of this study may underestimate the total cost of unhealthy diets, the team explains, as it can contribute to other health complications aside from CMDs. Additionally, other factors beyond the 10 used in this study could drive health risks and costs, they add. Finally, the NHANES study relied on self-reported data — participants were asked to recall what they ate in the past 24 hours — which isn’t very reliable.

The paper “Cardiometabolic disease costs associated with suboptimal diet in the United States: A cost analysis based on a microsimulation model” has been published in the journal PLOS Medicine.

Credit: Pixabay.

Price of new solar energy plummets by 26% in one single year

Credit: Pixabay.

Credits: Pixabay.

Market studies over the last year reveal major price cuts for solar energy at a global level. As far as new installations go, prices have fallen by 26 percent on average, though in some areas, they got much lower. This drop comes on top of an 80 percent price slash over the last ten years. In fact, today’s context is of such a nature that it makes economic sense to start building new utility solar today rather than continuing operating existing coal or nuclear plants.

Bloomberg reports that in China, the price for electricity sourced from solar dropped 44 percent last year, while last October saw a new record low price set in India. Such progress was made possible by ever lower prices for solar panels, but also smarter government incentives like China’s and India’s auction systems which determine how much a developer should get paid based on real-time demand. China, in fact, grew too much solar for its own good. The communist state now generates more renewable energy than its grid can accommodate — it’s the worst renewable curtailment problem in the world. But even in this situation, the transition to an auction system seems to do wonders, putting a lid on overly enthusiastic clean-energy booms that might end up doing more harm than good.

“Only those that have the most efficient technology, most precise and best practice of manufacturing, most solid financing and strongest control over the supply chain can survive,” said Qian Jing, the vice president of JinkoSolar Holding Co., the world’s biggest solar-panel maker.

Credit: Bloomberg New Energy Finance.

Solar panels have become much cheaper this year. Credit: Bloomberg New Energy Finance.

Since 2012, the most renewable energy capital has flowed into the Asia-Pacific region, where solar and wind capacity has effectively tripled over the last five years. What’s more, there doesn’t seem to be any signs of slowing down. China is on track for another year of record installations, according to BNEF, which estimates the nation ought to finish the year with 50 new gigawatts of solar power. That’s more than Japan’s entire photovoltaic capacity.

Thanks to the auction system, the price for solar has been pushed lower than it has ever been and things are moving at an astonishing pace. Last year, Saudi Arabia set a world record for the lowest price for kWh any renewable technology was able to achieve. Today, the same price is this year’s highest price, Think Progress reported after Saudi Arabia crushed its own record with a jaw-dropping lowest bid of 1.79 cents/kWh. Elsewhere, Mexico’s latest auction on November 29 may not have set a new world record but has impressed analysts nevertheless. Market newcomer Mitsui-Trina placed the lowest solar bid, at $19.74 per megawatt-hour, officially the lowest solar price in Latin America so far. 

“Most regulators are discovering competitive auctions are better in capturing the actual cost of building renewable energy projects,” explained Justin Wu, who oversees the Asia-Pacific region for BNEF.

The bottom line is that solar is expanding aggressively and shows no sign of stopping anytime soon. After all, there is a lot of ground to cover. 

How much you’d pay for something depends on what prices you’ve seen recently

The value of products we encounter will influence how much we’re willing to pay for subsequent items, a new study suggests.

Price Tag.

Image via Pixabay.

People are willing to pay more for products after coming across low-priced ones and would be more stringy after encountering or browsing high-priced items, new research reveals. The paper points to a previously undiscovered element that guides consumer behavior.

“How people value an item is not a simple function of that item alone,” explains Kenway Louie, a research assistant professor at New York University’s Center for Neural Science and paper co-author.

“The valuation process is inherently relative, with people valuing the same exact item more or less depending on the environment they recently inhabited. Our study shows that rewards cannot be evaluated in isolation, but instead must be viewed through the lens of the recent past.”

Our brains heavily rely on comparisons when processing information instead of drawing on absolute judgments. In sensory data processing, for example, our perception of the stimuli is highly dependent of context: a gray square will appear darker to someone coming in from a bright environment than to someone in a dark room.

Cost blindness

However, the influence of sensory processing on decision-making is less well understood. That’s what the team behind the paper, which also included co-authors Paul Glimcher, a professor of neuroscience at the New York University (NYU) and Mel Khaw, now a post-doctoral researcher at Columbia University, wanted to find out. So they set about studying the impact different environments had on how people valued food items.

Towards that end, they set up an experiment where participants were shown 30 different items of food on a computer screen, and would then report how much they’d be willing to pay for each. The researchers then pooled all the responses, ranking them from highest to lowest price based on the answers.

The team wanted to see if the price of encountered items would change how much the participants were willing to pay for subsequent items. As such, participants were asked to look at the items again, but this time they were only shown the 10 lowest-valued items (a low “adapt block”). Then, they were asked how much they would pay for each of the 30 items. The reported prices were lower across the board following this step, for all participants and all of the 30 items, compared to the baseline trial.

Next, the researchers repeated the adapt block, but this time kept it high and only showed the 10 highest-rated items. After viewing them, the participants were willing to pay less for all 30 items in the study than they reported during the baseline phase.

The findings showcase how fundamental comparisons are in our decision-making process, even in situations where we think we’re perfectly objective.

“Collectively, these findings provide the first evidence that adaptation extends to the economic value we place on products,” explains Louie.

“Moreover, they suggest that adaptation is a universal feature of cognitive information processing.”

The paper “Normalized value coding explains dynamic adaptation in the human valuation process” has been published in the journal PNAS.