Hodja Nasreddin and Behavioral Economics [Gains and Losses]

The Difference

[By Anonymous]

One of the most important concepts in behavioral economics is that people react differently to gains and losses. An example from Hodja Nasreddin:

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Hodja Nasreddin

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“One day Nasreddin went to his neighbour and asked to borrow a large cooking pot. The neighbour obliged and Nasreddin promised to bring it back shortly. Weeks passed when the neighbour came by to remind Nasreddin about his pot.

Embarrassed, the hodja went inside and after a short time re-emerged with the pot. On handing it over there was a clanging sound inside upon which the neighbour lifted the lid to reveal a smaller pot inside. “Hodja, what is this?” He exclaimed. “Neighbour, it seems the pot you gave me was expecting and this is her young!” The neighbour gave the hodja a silent look and left with both pots.

Some time later Nasreddin again asked to borrow the pot and the neighbour happily obliged. Again weeks passed and the neighbour came again inquiring about his pot.

“Alas!” Nasreddin said, your dear pot passed on to the afterlife, please accept my condolences.”

“But hodja, how can a metal pot die?” said his neighbour whereupon Nasreddin hodja flew into a rage and yelled:”You had no trouble believing it gave birth but her death strikes you as incredible? Now begone, you rascal!

NOTE: Why backward? http://mullahnasruddin.com/?p=1927

Assessment: Your thoughts are appreciated.

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