The U.S. economy has seen better days. According to a recent Gallup poll, 86 percent of Americans now believe it's "getting worse."

So here's the big question: Where should you put your money in these difficult times?

To answer that question, we must first understand our own minds -- or, more precisely, the human decision-making process. That's what the burgeoning field of behavioral economics is all about. And it gives us some fascinating insights into the where-to-invest dilemma that so many Americans face today.

Gone are the days of "homo economicus" -- the fully rational agent posited by classical economic theory who diligently weighs costs and benefits before making a purchase. In his stead we get a flesh-and-blood human being whose decisions are often arbitrary, inconsistent and impulsive.

It turns out we're particularly bad at assessing the risks and rewards involved with investment. Our evolved minds aren't wired for modern-day finance.

For one, humans are "loss averse," meaning they dislike losses more than they like gains. As the famous behavioral scientist Amos Tversky put it, "We have probably evolved to be very sensitive to losses and much less sensitive to gains. … [T]he losses, not the risk per se, are what drive people's preferences."

Given the choice of either getting $100 or taking a 50/50 chance of getting $200 or nothing, people overwhelmingly prefer the sure $100. But given the choice of definitely losing $100 or a 50/50 chance of losing $200 or nothing, people overwhelming prefer to take their chances.

So we avoid risk when it comes to making money, but we seek risk when it comes to losing money.

The implications for investing are obvious. People shy away from financial investment vehicles such as stocks because losing money causes more pain than gaining money causes pleasure. It's easy to spend money on such pleasurable activities as a night out at the movies or a weekend away.

Investing does not give that same sort of mental reward, and the rewards come only after a long period of time. It's much easier to get someone to put money into a savings account than into a low-risk mutual fund, even though the fund is very likely to have a higher return.

A second major insight has to do with how we mentally account for expenses.

Classic economic theory holds that money is fungible -- a dollar is a dollar whether it's going toward a hamburger or a mortgage. But research shows we often group financial obligations into separate, noninterchangeable accounts.

Say you go to a play that costs $20 a ticket. You get to the theater, check your wallet and see that you've lost $20. Do you still buy the ticket? Most people would say "yes."

Now say you already purchased the $20 ticket, but discover you've lost it once you're at the theater. Do you buy another one? Most people would say "no."

Now, there's no actual difference in the cost between the two cases. So why the inconsistency? As Mr. Tversky notes, "The act of buying the ticket involves opening what might be called a 'going to the theater account.' By the time the ticket is lost, this account is down $20, and buying a second ticket would mean a cost of $40."

For many, the ticket isn't "worth" $40. So they don't buy it. If the money is simply lost, though, the ticket account is still at zero. And spending the additional $20 doesn't put the account over the limit.

These quirks need to be overcome. Most U.S. workers have saved less than $25,000 for retirement, according to the Employee Benefit Research Institute. And approximately 45 percent of American households still don't own a single share of stock.

People need to understand that no matter where they put their money, risk is involved. If you put your life savings between the mattresses in your bed, there's a chance the house will burn down or the money will be stolen.

Also, people need to be aware of the fact that stocks generally outperform all other assets. Large company stocks as measured by the S&P 500 have averaged an annual rate of return of about 10.4 percent since 1926. Smaller company stocks have posted a return of 12.5 percent. There are ups and downs, of course. But in the long run, the rewards outweigh the risks.

But because humans are hard-wired to be risk-averse, we often ignore the obvious and make poor investment decisions anyway. So the trick is not letting our psychological ticks muck up our investment strategies. One easy solution is to enroll in an automatic investment plan, where part of your paycheck is deposited directly into a 401(k) or IRA.

We're predisposed to be irrationally fearful of even small risks with our money -- and it ends up costing us in the long run. Remember that the next time someone tells you the economy is going down the gutter. It may be a great time to start an investment plan.