THE RIGHT'S REAL BITTER-CLINGING IS TO HOMO ECONOMICUS:

The Empirical Economist (Robert Langreth, 05.10.10, Forbes)

If you carry balances on several credit cards with varying interest rates, you should pay back the one with the highest interest rate first. But that is not what happens in real life, if the results of a new loan game devised by behavioral economist and bestselling author Dan Ariely are to be believed.

In the online experiment volunteers pay off loans of various sizes and interest rates. In each of 25 rounds they receive income and decide how to allocate the money to pay off the loans. The goal is to maximize how much money is left at the end.

So far nearly 1,000 volunteers (mostly students) have tried the game, and almost no one has managed to stick to the optimal strategy. People are constantly tempted to pay back the small loans first. Closing loans makes people feel good, even when the right thing to do is to keep all the loans open. The researchers add to this temptation by occasionally giving people a "bonus" just big enough to pay off a couple of the low interest rate loans. "We have this incredible desire to feel we are making progress," says Ariely. "The satisfaction we get from fewer loans opened overwhelms our decision of what is the right thing to do."

Ariely, 43, a professor of psychology and behavioral economics, is among the most creative of a new breed of social scientists charting the numerous ways our psychological quirks cause us to deviate from rational behavior.