Sublime

When we have no idea what something should cost, we believe we’re making the best decision if we neither overspend on the deluxe model nor go too cheap on the basic one.

Among those in the group who lost their ticket, 54 % decided to buy a new one. Among those in the group who had lost the $10 bill, some 88 % decided to buy a ticket. Mental accounting helps explain this discrepancy.

Some economists are already working on that. They are using this brain-imaging data to support a new political philosophy known as asymmetric paternalism. That's a fancy name for a simple idea: creating policies and incentives that help people triumph over their irrational impulses and make better, more prudent decisions. Shlomo Benartzi and

people are willing to take big chances with their “winnings.”

(Herbert Simon said it best: “A wealth of information creates a poverty of attention.”)

companies have a strong incentive to exploit behavioral biases, including availability, unrealistic optimism, and anchoring.

But that’s different from assuming it as an entitlement.

Loss aversion has a lot of relevance to public policy. If you want to discourage the use of plastic bags, should you give people a small amount of money for bringing their own reusable bag, or should you ask them to pay the same small amount for a plastic bag?