The Economics of Human Behaviour
I’ve been reading a bit of Tim Harford’s work lately (brilliant economic writer) and have become quite interested in his thoughts on the application of economics in everyday life. For example, his response to a reader asking how to price 8 bedrooms in a share house fairly. What I thought incredibly applicable to us though, was actually quite an old article on rationalising resolutions.
In this article he talks about a London School of Economics study in which a group of students were offered a choice of movies to watch – either today or at some point in the future. When choosing one to watch today, participants generally chose something lighthearted but when selecting a film to watch at a later time, the majority chose more ‘character building’ films. They later repeated this study with fruit and chocolate to the same effect.
What does this say about humankind? In essence, that the decisions we make for ourselves today, don’t necessarily reflect our longer-term wishes. When you think about it, isn’t that really the reason we get in debt, fail to save and force ourselves to live payday to payday? How many times have you told yourself you’ll start saving next pay, but that payday never comes? Or started paying down debt only to be wooed by a great deal on a pair of shoes / shiny gadget / whatever your poison? I know I sure did it far too many times to recount.
So how to overcome this inherent downfall in the human psyche now you know it exists? For me, it was about making an agreement with myself that if a decision or action I made today didn’t directly correlate with my long-term goals, I’d have to wait to action it. How long I have to wait depends on the magnitude of the decision.
The other alternative is to put barriers in place to prevent actions that won’t help you reach your goals. For example, when I was paying off my debt, I told my fiance about what I was doing and why it was so important to me. This meant that if he thought I was getting a bit too frivolous for my own good, I’d hear “are you sure you can afford that?”.
The bottom line is, this behaviour certainly isn’t rational or logical, but rather than giving in to it or going around feeling sorry for ourselves, we can take pre-emptive strikes to keep us on track!
Feel free to tweet or email me with ways you prevent yourself from making old mistakes that are detrimental to achieving your goals
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
