You are poor than you think yourself

bylannyboy89

The question "Why can not we manage the money well?" Is that "current bias," "current bias maintenance," etc.It can be explained from multiple perspectives of behavioral economics. Mr. Alberto Cardaci, an economist, is conducting research on the theory that "people consider themselves to be wealthier than they actually are."

Why you're poorer than you think you are - NZ Herald
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12060425

Mr. Alberto Cardaci of Sacro · Cuore · Catholic University Complexity Lab in Economics (CLE) in Milan, ItalyAXA Research FundIn response to the scholarship of "Cognitive biases, perceived wealth and macroeconomic instability (cognitive bias,MacroeconomicsWe started a new project named "Instability and wealth recognition".

Mr. Cardaci set up the hypothesis that "People are consuming more money than the range they should use because they are wrongly recognized as" how rich are they " From the viewpoint of social cognitive psychology, we are verifying this hypothesis using experimental economics techniques.

In detail of Mr. Cardaci's hypothesis, the degree to which people feel "I am wealthy" isLeverageIt depends on the value of. Leverage tells you to raise profit margin by using other capital in investment etc. According to Mr. Cardaci, even if the net assets do not increase, money increases, the person feels "get rich", further consuming It is said that it will be done and borrowing will be done. Cardaci and others call this a "leverage-bias bias hypothesis".

bybruce mars

Mr. Cardaci tested the leverage bias and said that 78% of the subjects indicated that they had false recognition about the amount of property they own. And this change in recognition is based on the composition of property, and the recognition will change even if the net asset has not changed as hypothesized.

Based on standard economics it is not reasonable for behavior to change despite the fact that net assets have not increased in individual consumption and borrowing decisions. This research shows that this unreasonable behavior can be explained by "false recognition about property".

Prior to the global financial crisis in 2007, the debt level of American families had increased at a momentum that exceeded 100% of GDP. American society at that time was in an environment where liabilities were easily borne. Although it can not be said that most of the personal debts accumulated in society have been brought about by the aforementioned leverage bias, the possibility that perception of property is influenced at the level of macroeconomics, not only at the individual level, Mr. Cardaci says. .

byPeter Heeling

And Carderi said that the leverage-bias hypothesis is meaningful not only for borrowers but also for lenders. This is due to the fact that nonperforming loans are accumulated by borrowers who can not fulfill their obligations.

For the project of Cardaci, the first round of research results will be announced soon.