Tuesday, 21 May 2019 | 03:49 WIB

Deconstructing Human Irrationality through Behavioral Economics

Professor Richard H. Thaler (wikimedia)

Error Thinking # 1: Loss Aversion

Dozens of studies in behavioral economics science proves that we humans tend to be too afraid of potential losses, compared to the potential benefits to be achieved.

The phenomenon is referred to as loss aversion - or too concerned with potential losses.

People everywhere in the world are indeed afraid to take risks. We are all more afraid of potential losses; rather than eagerly pick up profit opportunities.

In one study even revealed the pain we will lose was more imprint in the heart than pleasure due to profit.

In other words, the 10 million loss experience turned out to be much longer in the heart, compared to the feeling of happiness resulting in a profit of 10 million.

Loss aversion might be able to explain why the majority of people are hesitant to start a new business independently.

Even before starting a business, most people are afraid to go ahead. Afraid lest maybe even loss. Do not let my business fail.

Loss aversion which may also explain why most people are rather pessimistic with the chances of successes they will have.

Error-thinking of this kind that can make our life become tougher later on.