The Endowment Effect and Tesla Autopilot & FSD: The Remedies & Their Limits

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In a recent piece at Slate, David Zipper discusses the backlash NHTSA got when it appointed Missy Cummings, a human factors researcher, to be an advisor. Within the Tesla community, accusations of bias against Tesla and hatred of Elon Musk followed. Before it was over, Cummings ended up deleting her Twitter account to escape the onslaught of misogyny and downright crude behavior (a number of people made fun of her name, saying it sounded pornographic).

Several other CleanTechnica writers have waded further into this controversy, and I don’t really wish to do that here. I did find something else interesting from Zipper’s article that merits further discussion and analysis: the Endowment Effect, and its use against regulatory systems.

What Is The Endowment Effect?

It’s often said that “people want what they don’t have,” but research has found that this is often not the case. Once somebody takes ownership of something, they’re more attached to keeping it than they are to the idea of getting something they don’t already have. Politically speaking, people are more willing to fight for something they already have than they are willing to fight for something new that they don’t have yet.

Zipper gives Uber’s market entry strategy as an example. When Uber entered a new city or state, they didn’t start by applying for a license or asking the jurisdiction to change the laws and make their service legal. They knew that taking that approach probably wouldn’t work, because nobody is going to show up to a city council meeting or a legislative hearing so some newfangled cab company can come to town.

Instead, Uber just started operating in places, even if the service was illegal or in a legal grey area. Because Uber is so much easier and faster than a cab, passengers loved the service. Drivers quickly started depending on it to pay bills, too. So, when the city or state decides to bring the hammer down and stop Uber from operating, passengers and drivers show up in big crowds at meetings and hearings, and gladly send emails or make phone calls to defend the service. This left elected officials unable to shut the service down without risking losing their jobs.

People wouldn’t fight like that for a service or source of income they never had, but they fight like hell to keep a service or income that they already have. That’s the Endowment Effect.

Applying This To Autopilot and FSD

Zipper argues that Tesla took a similar approach to Uber with Autopilot. Autopilot isn’t illegal, but it might not have fully complied with applicable regulations that required safeguards against predictable abuse. Zipper seems to argue that it outright broke the regulations, but that’s a matter of interpretation. Tesla would argue that they accounted for abuse by providing a torque sensor and now a form of driver monitoring in vehicles equipped with an in-cabin camera.

But, if NHTSA ultimately determines that Tesla didn’t follow the regulations, differing interpretations today are no longer relevant.

If Tesla had applied to regulators or formally asked for an opinion on Autopilot in 2014, almost nobody would have wanted to take Tesla’s side to introduce Autopilot. Such driver assist systems really didn’t exist in those days, so few people would take time out of their busy days to demand that NHTSA allow the system. They were happy with what they had at the time (the best electric vehicle on the market).

But, if regulators decide to order Tesla to disable or seriously restrict Autopilot and the FSD Beta tech today, people would get very angry. Something they own and paid thousands for can’t just be taken away without people feeling like something was stolen from them by the government. If they’re a regular user of Autopilot, they obviously don’t think the system is unsafe, so they’re likely to see it as a conspiracy against Tesla or otherwise the actions of a bad or corrupt government.

This puts the regulators in a tough spot. Taking away or reducing the functionality of Autopilot and/or the FSD Beta would create a big public controversy, drawing in hundreds of thousands of people willing to fight, donate, and vote against the people who want to take something away from them, even if it wasn’t legal to offer the product in the first place.

Ways Around This Issue

Pointing out the Uber regulatory strategy and calling it unjust or immoral doesn’t really inform the public. I want to go beyond what Zipper pointed out and analyze potential ways the Endowment Effect could or couldn’t be dealt with by government officials.

One obvious workaround is to make sure that people are compensated for something they were forced to give up, but that’s more complicated than it seems on the surface.

For one, behavioral economists have found that people put a higher price on giving up something unwillingly than they do on acquiring something new they don’t already own. Thus, simply refunding whatever was paid for the product won’t be enough to get most people to accept the loss, so the idea of requiring Tesla to do a refund won’t be enough to get people to accept an NHTSA crackdown on Autopilot.

An alternative would be for the government to pay people a premium on top of whatever refund Tesla is forced to give. People who genuinely think Autopilot was illegal from the start won’t like that idea, because the idea of taxpayers paying to fix a problem caused by illegal actions on the part of Tesla sounds unjust. People who feel that NHTSA pulled the rug from under Tesla with changes in interpretation would see this as more just because the government is paying people for taking something away that was once actually legal.

It’s also worth noting that the government isn’t required to compensate for takings unless they’re taking property for public use. Taking Autopilot away and using it for the military or civil use would be something the U.S. Constitution requires compensation for, while taking away without intent to turn around and use it wouldn’t require compensation.

Featured image: Screenshot from a YouTube video explaining the Endowment Effect. Image by QHat.

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Jennifer Sensiba

Jennifer Sensiba is a long time efficient vehicle enthusiast, writer, and photographer. She grew up around a transmission shop, and has been experimenting with vehicle efficiency since she was 16 and drove a Pontiac Fiero. She likes to get off the beaten path in her "Bolt EAV" and any other EVs she can get behind the wheel or handlebars of with her wife and kids. You can find her on Twitter here, Facebook here, and YouTube here.

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