I was watching this PBS special called Mind Over Money the other
night. year. Yes, it’s still applicable.
It was about the economy. And how everyday people’s spending habits factor into economics itself. It focused a lot on the stock market, but it was really interesting on a smaller scale, too.
PBS’ Mind Over Money Overview
The show presented two different views on economics: rational economics and behavioral economics. Rational economics is the system we’ve been using for a while…at least 50 years. You could also say we’ve been using it since the days of Adam Smith.
It assumes that before anyone buys anything, they weigh the outcome of their purchase carefully. Quality, utility, and desire are all factored into these crazy long and complicated equations subconsciously in our heads, meaning we always think about how long the product will last, how useful it will be to us, and how much we really want it vs. need it.
This economic rationality theology assumes that we are all rational spenders. Always. Economics as we know it depends on it.
Behavioral economics says that the populous is mostly made up of emotional spenders. Things like competition, want to be of a higher social class than we actually are, and the desire for immediate gratification factor into our decisions when we buy.
In this model, there are some rational spenders, but the majority of the market is made up of emotional spenders via the behavioral rationality model.
The documentary talks about how back in the day (like up until 25 years ago,) the people on the floor of the stock exchange would be yelling, screaming, and competing. These professionals would more often be emotional spenders than the people who work there today.
With the internet and programs that allow us to major in the pseudo-new field of economics, more of these professionals do research using complex equations which they learned in school while studying economic rationality than in the past.
That means that the people who handle stocks today are more rational spenders than their predecessors.
The film comments on how that effect(s)/(ed) the stock market in recent years. I’m not going to get into that aspect of it. I took one economics class in college that I pretty much slept through.
But I’m not going to pretend like I know it all now just because I watched one PBS special.
What I would like to get into is a reflection on my own spending habits. I’d also like to invite you to join me.
Do we operate from a place of behavioral or economic rationality?
I tend to believe more in the behavioral model than economic rationality.
I also feel like I am one of the few who is anal-retentive about my money. I want to know where every penny is going. If I see a really cute dress, I don’t just buy it. I look around the whole rest of the mall and then decide if it’s still something I need.
If it is, is it worth the money I’d have to fork over to pay for it?
Most usually it’s not. That being said, I have a very western/American sickness. I get this huge high from buying new stuff. Every once in a while, I give in to the behavioral model.
When I say once in a while I mean like once a year–maybe.
But when I do, I get so happy. I feel like it should bother me. I know it’s wrong. But in that moment, I don’t even care that I’m being an emotional consumer. It feels too good to care.
Typically, when I participate in this indulgence, I later experience buyers’ remorse. It’s been rare few occasions when the spending guilt didn’t lead me to return the items I didn’t truly need.
That being said, I know I’m one of the few that waits to remove tags from my emotionally-charged retail purchases, and one of the fewer who actually returns them within return policy windows.
I truly believe that’s why the stock market is doing well, today, in 2017. The uncertainty of our country’s future has so many people stressed TF out that they’re engaging in emotional spending–providing a temporary boost to retail profits.
Am I an emotional or rational spender?
My spending profile: Rational consumer with the extremely rare emotional shopping trip thrown in. Typically resolved by buyers’ remorse.
Your spending profile: ?????
I’d love to hear your answer in the comments! Remember that Femme Frugality is a judgement-free platform. Whatever your answer, we’re interested in exploring your why–without condemning you in any way, shape or form.
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