In Money and the Brain, PayPal's Bob Carley explores the psychology of money: how we talk about it, how we think about it, and how it shapes our relationships and our lives.
In this first episode, Bob speaks with behavioral economist Dr. Meg Elkins to get her thoughts on the inflation we've experienced recently and how, Bob asks, it's affected not just our pockets and wallets, but our heads and heart.
When it comes to thinking about inflation and your expenses, are you more like Mr. Spock or Homer Simpson? It’s a pertinent question at this time when rising prices and inflation are putting the squeeze on household budgets.
Dr. Meg Elkins, a behavioral economist and senior lecturer at RMIT's School of Economics, Finance, and Marketing, believes the everyday person tends to be more like Homer Simpson. Instead of making cooly rational decisions based in logic, we tend to get caught up in the emotions that come with rising costs, and instead end up making Homer-like choices.
“If there's a fear of missing out, we tend to want to buy that thing and have that thing,” Dr. Elkins told PayPal's Bob Carley. “We tend to value things more that we can't have.”
This, in turn, can help fuel inflation, as our “scarcity bias” kicks in and we raise the demand on things that we're afraid we're no longer going to be able to afford, she explained. It may be unintentional, but these decisions have an impact.
So, what can we do about this? Dr. Elkins explains that we should learn about what's happening and educate ourselves, so that we're making smart, informed choices that are less driven by our instinctive fears over inflation.
“We're not always going to make the best choice, but we want to help people make choices they feel comfortable with,” she said.
That might mean adjusting our spending and saving habits in ways that we hadn't considered before. “In the whole, the economy's been really strong for a very long period of time,” she said. “We haven't really had to adjust our behavior.”
But the times are changing. So, what might an adjustment in behavior look like? PayPal offers some tools and services that could help you manage spending:
Watch the full episode above to hear more from Bob's interview with Dr. Elkins and delve deeper into what inflation is, the ways we think about it, and how it affects our lives.
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