Nobody sets out to be governed by gossip, yet it shapes an astonishing share of the ordinary day. Every one of us runs the same shortcut, and every one of us believes we are the exception. The usual story is that we are careless calculators. The better story is that we are careful about the wrong things. None of this is new. Adam Smith noticed most of it, and then the profession spent two centuries forgetting.
Where the model breaks
A better account of choice would begin with the ordinary case rather than the laboratory one. In the studies we have, the effect is modest, reliable and almost entirely ignored by the people it describes. The strange thing about gossip is not that it exists but that it works, most of the time, for most people. 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.
