How We Decide

Classical economic theory can't explain the premium equity puzzle. After all,…

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"People who are more rational don't perceive emotion less, they just regulate it better."

The New York City schools have recently begun experimenting with a program that pays students for improving their standardized test scores; initial results have been extremely encouraging. By focusing on immediate rewards, these incentive programs help correct for the immature prefrontal cortices of children and teenagers.

(Emotion and motivation share the same Latin root, movere, which means "to move.")

Imagine that you have decided to see a movie and have paid the admission price of $10 per ticket. As you enter the theater, you discover that you have lost the ticket. The seat was not marked, and the ticket cannot be recovered. Would you pay $10 for another ticket? When Thaler conducted this survey, he found that only 46 percent of people would bu

According to Slovic, the problem with statistics is that they don't activate our moral emotions. The depressing numbers leave us cold: our minds can't comprehend suffering on such a massive scale. This is why we are riveted when one child falls down a well but turn a blind eye to the millions of people who die every year for lack of clean water. An

Since the prefrontal cortex can handle only about seven things at the same time, it's constantly trying to "chunk" stuff together, to make the complexity of life a little more manageable. Instead of thinking about each M&M, we think about the scoops. Instead of counting every dollar we spend, we parcel our dollars into particular purc

During the peak of the housing boom, 55 percent of all 2/28 mortgages were sold to homeowners who could have gotten prime mortgages.

Mistakes aren't things to be discouraged. On the contrary, they should be cultivated and carefully investigated.