Have you ever wondered how we make choices? Some economists believed that we always decide based on logical reasoning, a concept known as utility theory. Utility theory suggests that we make choices by considering the rational facts and selecting the option that provides the best overall outcome or the most “utility.” For instance, if you prefer oranges to kiwis, utility theory would suggest that you’d choose a 10 percent chance of winning an orange over a 10 percent chance of winning a kiwi. This seems pretty straightforward, right?

Well, a group of influential economists, like Milton Friedman from the Chicago School of Economics, proposed that individuals are super-rational decision-makers in the marketplace. They called these rational individuals “Econs.” According to them, Econs all act the same way, valuing goods, services, and wealth based on rational needs.

But things get more interesting when we consider real-life scenarios. Let’s take John and Jenny, both with $5 million. According to utility theory, they should be equally happy with their wealth. However, if we dig deeper, we find that John started with $1 million and multiplied it, while Jenny had $9 million and lost some. Are they equally happy with their $5 million now? Probably not. We don’t always follow the strict rationality that utility theory suggests.