We often have the occasion to evaluate the pleasantness or awfulness of incidents in people's lives; most of us have opinions about what it is like to be old, or physically handicapped, or a resident of California. All of us spontaneously score events and situations and store evaluations of how good or bad they were, in the form of likes and dislikes. These judgments and feelings have also been produced in the laboratory, with the usual combination of artificiality and improved precision.
The goal of this chapter is to review the evidence for a unifying principle, which accounts for four conclusions of research on evaluations of outcomes. The first of these conclusions has been supported in many studies of choice.
The carriers of value in both risky and riskless choices are gains and losses. The same final state of wealth or endowment is valued differently, depending on its relation to the original state from which it has been reached (Kahneman and Tversky 1979). In studies of the endowment effect, for example, the outcomes of owning or not owning a particular decorated mug are represented, depending on the current reference point, as getting a mug or giving up a mug (Kahneman, Knetsch, and Thaler 1991; Thaler 1980; Tverksy and Kahneman 1991).
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