Learning endowment effect from Amitabh-Shashi starrer Deewar…

Nobel mania is going to continue for sometime now. Given it is on behavioral economics which is thought to be simpler to understand compared to other stream of economics, expect many more articles. So good time to learn and unlearn.

Amit Varma of Housefull economics in his entertaining column points to lessons of behavioral economics from the  Amitabh Bachchan-Shashi Kapoor movie Deewar.

Amitabh Bachchan: Aaj mere paas buildingay hai, property hai, bank balance hai, bangla hai, gaadi hai — kya hai tumhaare paas?

Shashi Kapoor: Mere paas maa hai. 

This scene from Deewar is one of the most iconic in all of Hindi cinema. Amitabh informs his bro Shashi that he has “buildings, property, bank balance, a bungalow and a car.” What does bro have? There is a shocked moment right after Amitabh says these words, perhaps because both men realise the sloppy redundancy of mentioning buildings, property and a bungalow in the same sentence. Then Shashi, whose mom in the film is a stern copy editor (though this revelation was left out on the editing floor), says that he has mother.

Richard Thaler, who got the Nobel Prize for Economics yesterday, would have approved. The scene is an excellent illustration of a term he coined: ‘The Endowment Effect.’ Both men place a high value on what they own — perhaps higher than they should.

Thaler, a giant of behavioural economics, coined the term in 1980. There was an excellent illustration of it in a study in 1984 by Jack L Knetsch and JA Sinden. Participants in that study were given, at random, either a lottery ticket or two dollars. After some time, they were given the option to switch. Most of them refused, because they had come to value whatever they had been given because it now belonged to them. 

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Amitabh’s character in Deewar certainly shows signs of it, with his affection for his buildings, property and bungalow, though one should perhaps not blame a cognitive bias for Shashi’s attachment to his mother. Mothers can be awesome.

🙂

But given that the movie was made in 1975 so it preempts Thaler’s endowment effect by a good 5 years! Salim-Jawed and film-makers of yesteryears of course could capture much of these human biases and irrationalities brilliantly. Hence they remain a classic …