MONEY AND SHOPPINGbetween two digital cameras – one boasted better resolution, the other
more vividness. In the absence of detailed technical specifications, but
with the evidence of sample photos, most people favoured the camera
with superior vividness. However, after people were given the detailed
specs on megapixel resolution, as well as sample photos, most chose the
model with superior resolution.
Hsee said people should make sure they try out products where
possible, rather than relying on specifications. Also he advised against
spending too much time comparing models. After all, your real-life
use of a product will usually be in isolation, not side-by-side with
its rivals.
Banking jargon such as “widows and orphans” (unsuspecting
investors), “yard” (a billion) and “stick” (a million) also helped shield
bankers from the reality of the consequences of their decisions. In
another study, Ariely looked at student cheating in a simple quiz
in which they reported back their own performance. Crucially, the
students cheated far more when they were paid in tokens that they
had to exchange for cash, compared with when they were paid in
cash directly. It’s as if the extra symbolic step helped introduce moral
fuzziness, which encouraged cheating. Ariely draws an analogy with
bankers: in their case it was the jargon and complex financial proce-
dures that created the moral fuzziness.
In many areas of social life, from driving regulations to drug laws,
human foibles are taken into account. Speed limits are imposed,
substances banned. Ariely argues for a similar approach to finance.
He believes “that relying too heavily on our capacity for rationality
when we design our policies and institutions, coupled with a belief
in the completeness of economics, can lead us to expose ourselves to
substantial risks”.
Can psychology help us find a way out of the mess we’re in?
According to the economic psychologist Stephen Lea of the University
of Exeter, saving is obviously important, but if everyone saves the
economy will never recover. The key, he says, is for wealthy and
comfortably-off people unaffected by the recession – and there are
many of them – to be given the confidence to spend, especially in ways
that leave money in the economy, for example by hiring the services
of the less well-paid.