Bloomberg | Opinion
People Hate Losses and That Affects U.S. Budget Talks
Cass R. Sunstein
Loss aversion is recognized as one of the major cognitive biases affecting traders. It's also at the basis of the sunk cost fallacy aka "throwing good money after bad."
Obvious application in the fiscal cliff kerfuffle is middle class loss aversion when faced with benefit cuts. People hate benefit cuts even more than tax increases. If the president doesn't use this to his advantage and accedes to benefit cuts, he will have proved (again) that he is GOP lite. Of course, the Bloomberg piece sees it differently.