ECONOMISTS have sometimes noted that we don't always value situations just by what we would have in them. They note that our thinking often instead looks to our gains or losses, to how what we might come to have differs from what we currently have. This, they hold, speaks badly for us, since the usual sorts of such thinking run against the logic of value. I argue that they don't run against it, and that giving such thinking its due lets us clear up a number of issues.

Here is a much-discussed concept, that of endowment effects. Richard Thaler, who introduced the idea, speaks of “the underweighting of opportunity costs” relative to out-of-pocket expenses. Kahneman, Knetsch, and Thaler speak of “the increased value of a good to an individual when the good becomes part of the individual's endowment.” Tversky and Kahneman note that “the loss of utility associated with giving up a valued good is greater than the utility gain associated with receiving it.”

I will put it this way, that where we have something we value, losing it often matters more to us than gaining it would have mattered if we didn't have it.We insist on getting more for giving up that something than we would have paid for it if we didn't have it. Thaler offers this example: “Mr. R bought a case of good wine in the late 50s for about $5 a bottle. A few years later his wine merchant offered to buy the wine back for $100 a bottle.”