Category: Uncategorized

I began a three-year term as editor over at Food Policy in 2015, which means that I handle submissions in my areas of expertise, deciding which manuscripts get rejected and which ones get reviewed, selecting reviewers for those manuscripts that do get reviewed, and so on.

Once again, I wanted to feature a few articles from the latest issue of the journal. There is nothing special about those articles beyond the fact that I thought they would be of interest to readers of this blog.

From an article on the high-end housing market in the Twin Cities published in the Star Tribune on Christmas:

Upper-end homes always take longer to sell than those that are closer to the market median. At the very top, the scarcity of comparable homes means that pricing is part art and part science. Agents are often at the mercy of their clients, who are sometimes out of touch with what’s happening in the market.

“You have to balance the relative demand in the market and the taste of buyers,” Berg said. “But you have to balance that against a lot of factors including what a seller has put into the property, which is sometimes irrelevant and has nothing to do with fair market value.”

This made me think about the concept of sunk cost which, as per Wikipedia, is “a cost that has already been incurred and cannot be recovered.”

I have discussed chronocentrism–“the egotism that one’s own generation is poised on the very cusp of history”–a few times on this blog (see here, here, and especially here). A few days before Christmas, I received an email from Star Tribune business reporter Patrick Kennedy, who had heard the term from an investment banker, and who wanted to chat about the concept. Here is what came out of a nice Christmas Eve chat:

We called Marc Bellemare, an associate professor of applied economics at the University of Minnesota who has applied chronocentrism to his work on the economics of global food policy, to further define the term made popular by British journalist Tom Standage, a science and technology writer for the Guardian newspaper and a deputy editor at the Economist.

Bellemare was happy to find parallels to the world of investing in explaining the concept. …

For investing, Bellemare pointed out that we look no further than the housing crash and the dot-com bubble.

He suggests chronocentrism leads to another economic concept called retrospective discounting, where our present bias leads us to put a lot of stock in the present and carefully pick and choose what we want to believe about the past.

The idea of retrospective (rather than the usual, prospective) present-biased preferences is how I see chronocentrism. That is, if we can give a greater weight to the present when looking forward, it is almost certainly the case that we also give a greater weight to the present when looking backward.