Mental Accounting
Etymology
Coined by economist Richard Thaler, who developed it through the 1980s and 90s and won a Nobel for his behavioral work. It joins the ordinary words “mental” (from Latin “mens,” mind) and “accounting” to name the informal ledgers we keep in our heads.
noun phrase · /MEN-tul uh-KOWN-ting/
The tendency to sort money into separate mental categories and treat each differently, even though all money is interchangeable.
What it names
A lens on the quirks of how we handle money — why we splurge a “bonus” but hoard salary, or drive across town to save on a toaster but not on a car.
Example
Mental accounting is why he blew the tax refund on gadgets but would never touch his savings for them.
Related idea
It directly violates fungibility, the principle that one dollar is perfectly substitutable for another; mental accounting is the psychological reason we act as if it isn’t.