The lost ticket

You lose a $50 ticket on the way to the theatre. Do you buy another? Now imagine you lose $50 cash instead. Most people answer the two questions differently.

You are on your way to a show. The ticket cost $50. At the door you find you have lost it. Do you buy another?

Most people say no. A hundred dollars for one show feels like too much.

Now change one detail. You never bought the ticket. You planned to buy it at the door, and on the way you lose $50 in cash. Do you still buy the ticket?

Most people say yes. The lost cash is annoying, but it has nothing to do with the show.

The two situations are identical. In both you are $50 down and facing a $50 decision. The only difference is which mental account the loss landed in. The lost ticket went into the “theatre” account, which now shows $100 for one evening. The lost cash went into a general account, and the theatre account is untouched.

We all keep these accounts. Money is money, but we treat it as if it were labelled, and the labels change what we will do with it. A tax refund gets spent in a way a pay cheque does not. A win at cards is “house money”. A gift voucher gets used on something we would never buy with cash.

Sometimes the accounts help; a savings jar you refuse to touch is one. But when a label makes you turn down something you wanted, it is worth asking which account is doing the deciding, and whether you would agree with it if you could see the whole balance.