Why does money make us irrational? And how can we resist it?

Why does money make us irrational? And how can we resist it?

Many of us are convinced that money awakens rationality and inspires rational and pragmatic decisions. But new research suggests that money plays the opposite role: it puts us into a drug-like state of intoxication and pushes us to act irrationally. However, although we are predisposed to certain behaviors when it comes to money, we can monitor ourselves and change our attitudes accordingly.

In this article, we will look at 5 rules and 8 principles, following which you can spend your money more rationally, staying reasonable and happy.

1. Don’t become selfish

The very thought of money can turn us into scoundrels. Our social skills fall apart when we are reminded of money and wealth. Marketing professor Kathleen Vos has shown that people who are shown money suddenly become less inclined to help others. And even subtle hints of money push us toward selfish behavior.

In an experiment, volunteers were shown different amounts of money. Afterwards, the lab assistant who was carrying a handful of pencils “accidentally” bumped into them and scattered them all over the floor. Volunteers who had not been shown money before were more inclined to help than those who had been shown small amounts. And these latter were more sympathetic than those participants who had been shown a lot of money.

Vos also showed that when people thought about money, they preferred solitary activities and were less likely to be physically intimate. At the same time, reminders of money can also induce positive changes. When the thought of money pops into the brain, people work harder on difficult tasks and are willing to take on more work. Reminders of money can increase personal productivity, though at the expense of our interpersonal skills.

2. Greed is good, but in moderate measure

Experience shows that money also prevents us from making moral judgments. A recent study by researchers at Harvard and the David Eccles School of Business found that even thinking about money increases the likelihood of lying or making immoral decisions. And two years ago, researchers at Berkeley demonstrated that people who drive expensive cars are four times more likely to cut off drivers of less-status cars.

But it’s not money itself that compels greedy or selfish behavior. As Maya Salavitz wrote in Time magazine, the reason is not so much that people belong to the upper class, but that they “agreed with Gordon Gekko from the movie ‘Wall Street’ that greed is a good thing. When researchers examined the relationship between perceptions of greed and unethical behavior, it turned out that social status no longer mattered here. In other words, rich people took advantage of others because they thought selfishness and greed were acceptable, not because they had more money or higher status.

3. Money is not the goal, but the instrument

Unfortunately, the capitalist society imposes on us that there is never a lot of money, which turns us into “money junkies”. At the same time, we forget one important thing: “The money should serve us, not we should serve them.” That is, money is not the goal, but the instrument.

Many people are obsessed with money and acquiring it – which often inspires a drug-like intoxication feeling. Psychologists suggest that this is an atavism, an emotional reaction programmed into the brain that goes back to the time when our ancestors were driven by the need for food. As the researchers put it, “the desire for money is a modern derivative of the desire for food.

Of course, money itself is not addictive. As psychologist Tian Dayton pointed out, it’s more about specific behavioral disorders. “The obsession with certain activities, whether it’s watching porn, the constant urge to eat something, or the lust for money, can trigger the creation of certain substances like dopamine in the brain or body, and those trigger a feeling of ‘high’ akin to a narcotic.” The life of such an addict is increasingly built around the abuse of the object of his desire.

4. Treat the loss of money philosophically

Losing money, especially large sums, hits our nervous system sharply. Therefore, it is better to accept this fact and let the situation go, and to focus on earning new money. Otherwise, the consequences of such a loss can lead to even larger losses.

Why do people, having lost money start to lose even more? Scientists attribute it to irrational thinking of a person under severe stress. Daniel Kahneman, winner of the Nobel Prize in economics, has shown that money leads to a breakdown in thinking, to strikingly wrong judgments and decisions. For example, we react very differently to loss and gain. The feeling of loss hurts more than the feeling of gain hurts more than the feeling of pleasure. He even calculated this difference. If I lost $100 today, I would feel the pain of that loss. But if I found the money tomorrow, I would have to find more than $200 to compensate myself for the bitterness of losing a hundred dollars. And the consequences of such an attitude could be disastrous.

Alas, this attitude is programmed in our brains, and such mistakes are made, for example, by monkeys. So the solution is simply to be aware of this problem, to be aware of it. We cannot change ourselves, but knowing our cognitive limitations, we can build an environment around ourselves that prevents mistakes.

5. The money is not equal happiness

Oddly enough, big money has rather the opposite effect and damages our ability to enjoy the simple things in life. Researcher Jordi Kvoidbach showed that money interferes with “enjoying everyday positive emotions and experiences. In a sample of working adults, wealthier participants reported a lower capacity for such enjoyment. Moreover, the negative impact of wealth on this ability undermined the positive impact of money on levels of happiness.”

So, for example, people who are reminded of big money are less able to enjoy the chocolate bar they have been offered. This also confirms the thesis that access to the very best can undermine our ability to enjoy the little things.

Given the detrimental effect money sometimes has on our cognitive system, our rationality, productivity, and kindness, it’s not entirely clear how to treat it properly. Financial Researcher Elizabeth Dunn puts forward eight principles to help consumers get more joy for the same money:

  1. Buy fewer material goods and more impressions;
  2. Use your money for the benefit of others, not yourself;
  3. Buy a lot of nice little things, not a small number of big nice things;
  4. Give up extended warranties and other forms of overpayment for insurance;
  5. Set aside consumption;
  6. Think about how the incidental features of your purchases can affect your daily life;
  7. Be careful about comparing prices and products;
  8. Pay attention to how happy other people are.

Let us especially note the second point: that we can take great pleasure in giving money to someone. How does this work? This process excites our nervous system and gives it pleasant emotions and, at the same time, we improve our social connections and enhance our status. Certainly, this should be done reasonably, certainly not to the detriment of one’s well-being.

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