Why do people make stupid money decisions?
Reader question: Presh, random question for you: why do people make stupid money decisions? Any thoughts would be appreciated. My answer: This is an interesting question. The other day I saw someone pay more for food because he ordered ala carte instead of getting the combo. I certainly scratched my head after that ...

Game theory and racism: the Schelling Segregation Model
[update: welcome readers from The Club for Growth] Fidel Castro says America is "profoundly racist." What do you think? His statement made me think about segregation. I thought about racially divided neighborhoods in big cities. I thought about the "racial cliques" I observed among peers at Stanford. I thought about how few ...

Marriage Jokes and Game Theory
I'm on vacation so my regular article will resume next week. In the meantime, I thought it would be fun to share a few jokes somewhat related to marriage and strategy. Hope you enjoy them, and feel free to add your favorite jokes in the comment section. One way to play matchmaker Father: ...

Is your car loan more expensive than you think? The difference between APR and the total interest you have to pay
Question from a reader (slightly edited): I have 60-month loan for an $18500 car with a 5.69 percent APR. When I do the calculation using simple interest it comes to $1052.65. On my contract from the dealer it says $2726.20. Why is their number closer to 15 percent? Am I missing ...

Can a rational person believe in miracles?
Rationality and miracles are seemingly in conflict. Rationality is about reason and natural explanations. Miracles are about emotion and supernatural forces. Can the two be reconciled? My friend sent me a fascinating explanation from The Language of God, a book by Francis Collins, a leader of the Human Genome Project. Collins ...

Age old wisdom for dealing with the financial crisis
photo credit: Brian-Progressive Spin Lately I’ve been fielding a lot of questions about the financial crisis. What should I invest in? When will the market recover? What is causing it? I pause before I answer. The truth is no one can answer these things with much certainty. My own opinion is to ...

Game Theory and Voting
Voting is a prized civic duty. But it is also a high stakes competition with clear winners and losers. In this light, voting can be viewed as a contest of strategy. If you want to make your vote count, it is useful to learn the rules of the game. History suggests ...

Are You Eating Your Retirement Savings?
Some of my acquaintances think it’s impossible to save nowadays. They say there is nothing left after taxes, housing, and basic social expenses. One person even said it’s getting to the point that $50,000 is not enough to live in Chicago. This seemed curious to me, so I started a discussion ...