Principles of Microeconomics / Unit 5 MIC 0425 short lesson, about 20 seconds
Mental Accounting and Commitment Devices
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The idea
Mental accounting treats dollars differently by their source, though money is fungible. Commitment devices bind a future self, such as automatic saving one must opt out of.
In practice
Holding savings at two percent beside credit-card debt at fifteen costs money every month.
Where people slip
Whether these are errors to correct or preferences to respect is the open question the course leaves open.
Your place on the trail
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