The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.
–Richard Thaler
The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool. –Richard Thaler
Would you drive across town to save $50 on a brand new car valued at $10,000? Probably not. Would you drive the exact same distance to save $50 on groceries valued at $100? Probably.
But why?
You might reason this way: on the groceries you’re saving 50% off the total and for the car you’re only saving half of 1%. But it shouldn’t make a difference whatsoever.
The value of your time doesn’t change based on what you are buying. In each scenario you’re the same person, driving the same distance, for the same reward. Why should it matter what you’re buying? Proportions are equally unimportant. Fifty bucks is fifty bucks. What percentage it represents doesn’t impact how much you can buy with it.
Your wallet doesn’t know the difference.
Look, spend your money how you want. All this means is be wary of the cognitive distortions that percentages and contexts can create in your mind. “It’s cheap for airport food.” Your wallet doesn’t know where you are. “I only got a discount on the shoes.” Even the smallest win is a win.
Your instinct might fight you on this, but debits and credits do not lie.