The usual story is that we are careless calculators. The better story is that we are careful about the wrong things. The strange thing about gossip is not that it exists but that it works, most of the time, for most people. The mind that evolved for small groups and immediate dangers is now asked to manage a pension. It does its best. The lesson is modest. Build for the person who exists, not the one in the model.
A better question
Notice how rarely anyone is argued out of gossip, and how often they are simply moved past it by a change in circumstance. None of this is new. Adam Smith noticed most of it, and then the profession spent two centuries forgetting. Nobody sets out to be governed by gossip, yet it shapes an astonishing share of the ordinary day. Ask most people why they did what they did and they will give you a reason; ask them again a week later and the reason will have quietly changed.
It is tempting to call this irrational. It is more useful to ask what it is for. There is a version of this essay that ends with a policy prescription. This is not that version; the mechanism is interesting enough on its own. Nobody sets out to be governed by gossip, yet it shapes an astonishing share of the ordinary day. Economists have spent decades modelling memory as a quantity. It behaves more like a weather system.
