Irrational at the Pump?

--Steve Proffitt

Are we generally over-reacting to increases in the price of gas?

There have been lots of stories lately about people losing thousands, or even tens of thousands of dollars dumping their big S-U-V's so they can buy a car that might save them five hundred dollars a year in gas. Good for the planet, yes. But not rational economics.

Other anecdotes: drivers who search for a gas station where they can save four cents a gallon on gas -- and use up five bucks of gas on their search. People (like me, I'll admit it) who roll through stop signs to save a little fuel, and risk a $128 fine for a moving violation.

More than a few economists seem to agree on a few reasons why we feel so much more pain at putting four dollar gas in our cars than we do, say, buying a four dollar latte.

Here's a video of one of them. Dan Ariely calls himself a behavioral economist. He's the author of Predictably Irrational: The Hidden Forces that Shape Our Decisions.

Do you agree that we are often irrational when it comes to gas prices? Would you like to share an example of your own skewed behavior when it comes to motor fuel? Or do you think we aren't reacting enough? Leave us your comments, please.

5:19 PM ET | 07-31-2008 | permalink

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