Status quo bias
Topic: Schools of Economic Thought and Economic Laws · NCERT: Beyond NCERT
Meaning
Status quo bias is a preference for the current state of affairs. People stick with what they have, or with the pre-set choice, even when better options exist. Changing takes effort, and giving up the current state feels like a loss. This is why defaults are such powerful policy tools: whatever is set as the default is what most people end up with.
Example
Under Atal Pension Yojana, contributions are auto-debited from bank accounts. Premiums for PMJJBY and PMSBY are also renewed automatically each year. Because people rarely opt out, this inertia works in the saver's favour. Opt-out organ donation (as in Spain) raises donor rates in the same way.
Don't confuse with
- Endowment effect: valuing an item more because one owns it. Status quo bias is a wider preference for keeping things as they are.
Related concepts
- Behavioural economics
- Bounded rationality
- Satisficing
- Heuristics
- Anchoring
- Availability heuristic
- Confirmation bias
- Overconfidence bias
- Prospect theory
- Loss aversion