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Declutter NOW! How Prospect Theory Clutters Up Our Closets

Prospect theory shows that once we own something, we actually overvalue it.

Why do we have cluttered closets, kitchen drawers, or stacks of untouched supplies in our office? It is easy to accumulate things, but so hard to then get rid of them. One explanation is that we feel our “prized” possessions are worth more than they really are, even to us! But once we get rid of them, we may hardly even notice they are gone.

The act of getting rid of something, including our junk, hurts us more than we think, so we would rather just hold on to it, despite our best intentions to declutter.

This can be explained by some very important psychological theories and potent effects:

Source: HowardSandler/Shutterstock

In a now classic paper, Daniel Kahneman and Amos Tverksy proposed an important distinction between how we value gains and losses: simply put, Prospect Theory says that losses are worse (more negative) than the similar-in-value gains are good [1]. In addition, the endowment effect is when something becomes yours, your value it more than it is actually worth to others, and are thus less likely to want to part with it [2]. Promotional give-aways are a good example, in which you are given some item (a free pen, sunhat, beach towel). Do you really need these items? Not really. It is hard to turn down a free gift, but once it is yours, beware, as it is harder to part ways with it. How about that stuffed animal you won at the fair, or the many free pens (with advertisements) that are now sitting on your desk, or scattered around your house?

This has been shown in a variety of settings. In one study, people randomly won either a nice pen or a new coffee mug. Both gifts are approximately equal in terms of dollar value. However, after winning your prize, you are then permitted to trade it for the other option, if you want. Surprisingly, very few people traded. Once you get your gift, you don’t want to give it up. It is now part of your endowment, even if you have only had it for a few minutes, and you now feel it is worth more than the other prizes, even though they are objectively of similar worth (or worthlessness!). A brain imaging study also showed this to be especially the case with hoarder, who experience challenges and pain when having to decide to discard something [3]. So, once you get the free towel or coffee cup or pen, at the grocery store for some promotional give-away, it is hard to ever get rid of it!

I doubt the Nobel Prize winning psychologist Daniel Kahneman and colleagues were staring at all the useless clutter they had in their office or home when they came up with Prospect Theory, but the endowment effect sure has some explanatory power in terms of why it is so hard for people to get rid of their prized junk. Sometimes it even takes a professional organizer (and not necessarily an expert in Prospect Theory) to come into your own house to declutter (my wife is much better at decluttering my office than I am). Part of the problem is knowing you obtained some item for some particular reason (possibly some future use) and you then envision yourself using it and needing it. One way to overcome this is ask yourself, have I used this in the past year, and if I didn’t have it, would I run out and buy it? Also, make it easy to give something away, by having a donation box in your closet, and donate regularly (an income tax receipt can be viewed as your gain, or helping those in need as a goal).

Source: shutterstock

We like to gain and accumulate stuff, but losing things is so much harder, according to Prospect Theory. This is especially true when we have control over holding on to something, thinking, you never know, you might need it in the future. However, there are costs to holding on to too many things, and not being able to find the truly important things in the clutter of the seemingly important.


[1] Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47, 263-291.

[2] Kahneman, D., Knetsch, J. K., & Thaler, R. H. (1990). Experimental Tests of the Endowment Effect and the Coase Theorem. Journal of Political Economy, 98, 1325–1348.

[3] Tolin, D. F., Stevens, M. C., Villavicencio, A. L., Norberg, M. M., Calhoun, V. D., Frost, R. O., Steketee, G., Rauch, S. L., & Pearlson, G. D. (2012). Neural mechanisms of decision making in hoarding disorder. Archives of General Psychiatry, 69, 832-841.