Psychology & Wealth - A Collage of Recent Research
Monday, January 19th, 2009I have been collecting some articles on psychology and wealth from a variety of journals I receive, and recently there was a group of articles published in the Monitor of Psychology which is published by the American Psychological Association. I thought I would briefly share some of the information reported.
One article in the January 2009 Monitor entitled “Mind over money” was an interview with Dr. Paul Zak who is the founder of the Center for Neuroeconomics Studies. He is the author of a recent book, Moral Markets: The Critical Role of Values in the Economy (2008). In discussing the neurology and brain functioning of certain behaviors, he states: “You need to know that your brain is prone to overreaction. . . When there’s a lot of uncertainty, like there is in the stock market, it turns out that making decisions involving money generates strong activation in the areas of the brain associated with fear. .. Studies have shown that brain areas that process risk are the same ones that process pain, so the brain’s reaction to this fearful, uncertain environment is ‘Get away!’”
Dr. Zak continues, “The same dopamine [a brain chemical] system … also activates when we get any kind of new news. One thing I suggest .. is not to watch TV, where you’re going to get all this rumor and innuendo. Wait until the next morning and read the papers.”
“Just as we saw an overreaction when the market was trending strongly upward, I think we’re also seeing an overreaction as the bubble is bursting. The brain has put you into survival mode.”
Another article, entitled “What’s Behind American Con$umeri$m?”, (from the July / August 2008 Monitor on Psychology) attempts to answer the question is: ‘Why do Americans consistently spend more than they earn?’ For example, since 1982 it is reported Americans’ personal savings rate has dropped from 11 percent to below zero.
Some different ideas postulated to answer the question of reduced spending include:
- When we are under stress (as most Americans are), we are more at risk for spending.
- The availability of credit cards to young adults conditions them to the process of incurring debt at a young age.
- Credit cards also facilitate impulse buying (more than buying with cash or checks.)
- We are bombarded with constant messages to spend through TV, the Internet, catalogs, print media and bathroom stalls, airplane tray tables, even egg shells.
Finally, “The Price of Affluence” discusses recent research which shows that “privileged teens may be more self-centered — and depressed — than ever before.” Although this is really not ‘new’ news, the theme continues. One of the authors cited, Dan Kindlon from Harvard, has written an excellent book, Too Much of a Good Thing: Raising Children in an Indulgent Age.
Another psychologist, Madeline Levine, believes that much of the mental distress is created by a fear of failure (both by the teens and by their parents). In fact, one study indicates that parents who overemphasized accomplishments were more likely to have teens who were depressed, anxious, or used drugs. Additionally, it is suggested that parents not shield their children from early life disappointments — let them try and fail, and learn from it.
I have written previous entries that may provide some additional information (a few worth looking at are: The Price of Privilege; The Dark Side of Wealth; Contentment - A Counter Cultural Concept ).
Have a good week!
Emotional intelligence, Executive performance, Optimism, Psychology of Investing, Stress management, wealth transfer, wealthy families
Fortunately, she was wearing her seat belt and she was not physically hurt. But, obviously, some practical, daily life lessons were learned, and we were extremely thankful for her safety.
He was a delightful, cheerful boy who was full of life. We are going to miss him terribly. The emotional pain associated with a child’s death seems to be indescribable.