Richard Thaler

I'll offer her a dollar.

If we were playing that game and I offered you a dollar, would you accept it?

No, I haven't told you what happens yet.

Remember, my job is to make fun of economists.

An economist will think that Lynn will take a dollar and so will predict that the first players will offer a dollar.

You're right that the most common offer is 50%.

And offers of less than 20% are rejected.

So yes, it's $20 and you can actually buy something with $20.

But you are probably thinking, well, that's not fair that he gets 80 and I get 20.

So the profit maximizing offer in that game is about 40.

Most people offer 50.

40 is a little greedy, but most people will accept it.

No, I resist the word rational or irrational.

My take on this is it's not that people are dumb.

It's that the world is hard.

And things like mental accounting, it makes sense for people to have budgets.

If you have a kid in high school that's going to be going off on their own or graduating from college, there's nothing more value you could teach them than how to have a budget.

That part is smart, but whether you should be willing to spend more money if it's from this pot of money than that one, that's not so smart.

So it's complicated and interesting, but not necessarily stupid.

You know, I think you can become aware.