Why We Aren't Smart with Money

Welcome.

I have always thought a lot about money, although perhaps not frequently enough about how to make a lot of it. Most of my deep ponderings have focused on things like why we spend the way we do, how we assign values to things, why we view one large amount of money differently than lots of little amounts that add up to the same, etc.

We are all smart people, in one way or another, but very few of us are very smart with money. Even those who are smart with money make some unexplainable decisions. Why is that?

A lot of what I write here touches on the field of Behavioral Economics. Even though I majored in Economics (and Mathematics) more than 25 years ago, I have never thought of people being exceptionally rational or consistent when it came to decisions (although we certainly are self-interested). I was happy to see the field of Behavioral Economics gain at least some mass appeal, if not the respect of the traditional Economics community.

Actually, everything we do is rational and consistent with our values. It is often the case that we have trouble understanding exactly why. That is what I will try to do here. I will bring up a topic, often common to everyone, bring out the conflicts of reason, explore the reasons for the chosen behavior and then in some cases where appropriate, suggest methods of changing that behavior if so desired.

I hope you leave smarter than you were before you joined us.