Mittens or Dinner?

James Kwak has a good posting on behavioral economics and irrational behavior that has led me to conclude I should probably invest in some warmer clothing. Possibly mittens.

Here’s part:

In your personal life, you should be aware of anchoring, because it can help you use your money more wisely. For example, for several years I would complain about being cold in the winter in New England. I was coldest when I was walking my dog, because then I had to be outside for half an hour at the time, and my hands were one of the coldest parts of my body. Finally I asked my wife to buy me the warmest mittens she could find for Christmas, and since then my hands have never been too cold. They probably cost $150 or something, but in the three winters since then they have probably given me something like one hundred hours of extra warmth, and they should give me at least another three hundred hours. That comes to less than a penny per minute of warmth (and less than a quarter per walk with the dog), and I would gladly pay more than that. Compare that to, say, two nice dinners that last for a total of four hours, and there’s no contest.

But until I asked for the mittens, I was overconsuming dinners and underconsuming warm mittens — because I was inferring my own preferences from market prices. In short, you are different from the average person, so at the same price level, some things will give you a lot of utility and some will give you not very much. The more you are aware of that, the happier you will be.

Time to go dig out my car, without warm mittens (or a shovel).