Mind over Money
Finance Class
Mind over Money Documentary
Monday, July 1st , 2013
As devastating as the global financial meltdown of 2007-9 was, it actually stunned the vast majority of people, including those generally regarded as financial wizards. Curiously, these individuals not only failed to predict the depression, but long argued that such a calamity was next to impossible. Their arguments rested on axioms central to classical economics, including the notions that investors generally act reasonably and tend to act on the basis of their own self-interest. The problem with this logic is that such rules no longer apply in extreme situations amid great panic. The video of the classic PBS documentary series Nova entitled Mind Over Money draws on interviews with fiscal experts and scientific experiments tied to money to investigate the great leap forward in economic understanding engendered by the said meltdown.
The main idea of this is that humans mind is acting irrational when it comes to money. For example before people make a purchase, they work out exactly what things are worth to them. The main model of consumer behavior assumes that we never buy anything until we’ve calculated the impact, for example, the retirement fund, even adding the interest rate to the math to know how much money we are getting and start planning on what to spend it on.
Another main idea of irrationality, is the emotional desire to win that drives people into buying things, like when they had the game of biding the $20, even though the guy paid more than 20 for that bill, he just wanted to win, and that idea drove him to pay more than what its really worth.
Another thing they pointed out was that people rather have a lot of money right this second than saving up to have a lot later. When they were asking people if they rather have $100 right now or $102 tomorrow people chose to go with $100 right now. This just shows how people just rather have the money right away to get the things they want
Mind over Money Documentary
Monday, July 1st , 2013
As devastating as the global financial meltdown of 2007-9 was, it actually stunned the vast majority of people, including those generally regarded as financial wizards. Curiously, these individuals not only failed to predict the depression, but long argued that such a calamity was next to impossible. Their arguments rested on axioms central to classical economics, including the notions that investors generally act reasonably and tend to act on the basis of their own self-interest. The problem with this logic is that such rules no longer apply in extreme situations amid great panic. The video of the classic PBS documentary series Nova entitled Mind Over Money draws on interviews with fiscal experts and scientific experiments tied to money to investigate the great leap forward in economic understanding engendered by the said meltdown.
The main idea of this is that humans mind is acting irrational when it comes to money. For example before people make a purchase, they work out exactly what things are worth to them. The main model of consumer behavior assumes that we never buy anything until we’ve calculated the impact, for example, the retirement fund, even adding the interest rate to the math to know how much money we are getting and start planning on what to spend it on.
Another main idea of irrationality, is the emotional desire to win that drives people into buying things, like when they had the game of biding the $20, even though the guy paid more than 20 for that bill, he just wanted to win, and that idea drove him to pay more than what its really worth.
Another thing they pointed out was that people rather have a lot of money right this second than saving up to have a lot later. When they were asking people if they rather have $100 right now or $102 tomorrow people chose to go with $100 right now. This just shows how people just rather have the money right away to get the things they want