Focusing on what he called “mental illusions,” Thaler explained that human beings make a lot of blunders. With clear examples, a sense of play and a little math, he showed that people just don’t act in the way predicted by standard economic theory.
If you give people a mug or a lottery ticket, they will demand a lot more to give it up than they would pay to get it in the first place. People are planners as well as doers, and their decisions can be radically different depending on whether they are planning or doing.
Because people have self-control problems, they adopt “precommitment strategies” like the ones used by Alcoholics Anonymous, drug abuse centers, diet clubs and smoking-cessation clinics.