Currency Of The Mind
In the recent past academic literature is abound with discussions around how classical economics is poor at explaining or predicting human behavior. For example, what explains Warren Buffett – spend a lifetime earning, only to give away his immense wealth to philanthropic causes one fine morning? And what happened to that elusive utility maximizing, self interested being whom we use to build our economic models?
If Warren Buffett is an exception, let us look at ourselves and the world around us. We make new year resolutions only to break them the next week. We keep money in our savings account and take loans at higher interest rates or revolve debt on our credit cards. We swear to eat healthy only to binge on the sinful sundae that we just spotted on the menu.
Some classify this behavior as “irrational”, almost accusing us of going against the rules – the rules set by economic models. But today we have a much better understanding of how the brain takes decisions and what it tries to achieve in the process, thanks to advances in Neuroscience.
We now know that the currency of the mind is not money or economic utility, but emotions. We also know that the connection between emotion and motion is not just etymological, but a fundamental fact of the human (as also other animal) brain. Emotions drive us to action. What is more important, action that maximizes “Emotional Utility” and not necessarily Economic Utility.
Seen in this light, most human behavior falls into place. It explains why we pay money to engage in adventure sports, chase inconsequential goals in online games, enjoy gambling, prefer spending time on facebook rather than more materialistic pursuits etc.
If we appreciate this fundamental truth, we would have a much better understanding of what drives people to action. It will help design interventions that can influence behavior much far more effectively.
And, perhaps governments and other social agents can attach more importance to things that matter most to societies. For starters, we would stop referring to societies as economies and stop measuring progress using the single, dry dimension of economic growth. Instead, we would focus a lot more on understanding the rich and colourful world of emotions and what maximises them. It will help us define well being, based on what is truly important to us.