The Psychology of Spending in Today’s “Economy”

Many people are cutting back on expenditures because of the current “economy.” In one sense, this is rational behavior, provided that the economic conditions are merely a reminder of what you should have been previously doing. But this isn’t the case for most people. Most people who have drastically cut back on their spending are doing so because of what they read and hear in the news. The news tells them that the economy is in decline because fewer people are spending. But why are millions of people spending less? Some of them have lost their jobs, or realize they spent too much (e.g. buying a house they could not afford). But most are making the same money as before, and a few are even making more. But they are also spending less. Why? Again, there may be reasons, but the most common reason I run across, by far, is “the economy.” This is merely a way of expressing: “I read and hear on the news that the economy is bad. Therefore, I’m in a panic.”

I don’t want to knock rationality and caution. I’m strongly in favor of the free market, and I am well aware that a free market will never function unless rational, self-responsible people exercise proper judgment in it. But if all this cutting back on spending now makes so much sense, why didn’t it happen earlier? And if the spending before really was feasible and justified, for most people, then why must it stop now when most of those people are still making the same money? For example: If you need a new car even more now than a year ago, why do you flat out refuse to buy it this year, when you’re making the same amount of money and need the car even more? Well, FoxNews or CNN said the economy is in a tailspin. And why do they say this? Largely because nobody spends anything! Some people I know will say, “It’s the media’s fault.” But I insist on going a step further. People don’t have to listen to the media. The media just serves up what sells. Anxiety and doomsday must sell.

THIS is the problem–not that the bulk of our media is so negative, but that people latch on to negativity as the all-powerful, metaphysically defining truth. I suppose this is what worries me most about America right now, in the psychological sense. Have a majority succumbed to the false belief that life is ultimately negative and terrible, and that good times are merely an illusion? If so, then our economy will never get better. An “economy,” especially one that matters like the American economy, is nothing more than millions of people making countless decisions and transactions in a marketplace every single day. If “the word” is that we shouldn’t spend, even if it makes personal and objective sense to spend in a certain context, then I don’t know what happened to rationality. My point is that neither spending nor hoarding is intrinsically good. If “the media” start to suggest that spending is “intrinsically bad” then you’re operating on a flawed premise, right there. Ignore the media and revert to what makes objective, rational sense in your OWN situation. Hoarding and standing still are no more the answer than recklessly and mindlessly spending.