There is a wide-ranging interview in Strategy+Business with Nobel-winning economist Dan Kahneman. In light of flu fear, and the current panic about mad cow consumption, his comments about homo economicus and people’s tendency to overweight low probability outcomes are awfully relevant. As he says, “…the prospect of the worst case has so much more emotional oomph behind it.”
On a less serious note, the interview starts with the following question:
A bat and a ball cost $1.10 in total. The bat costs $1 more than the ball. How much does the ball cost?
Drag your cursor over the following blank area for the correct answer. The correct answer is that the ball costs 5 cents, while the bat costs $1.05, Most people say 10 cents for the ball because the original $1.10 figure separates so neatly into $1 and 10 cents. Was your initial response correct? Be honest.