Wednesday, August 04, 2010

The Psy-Fi Blog: Money Illusion

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The Psy-Fi blog examines the Money Illusion today. It is right that this is one of the most common illusions. Rare is the day (and non-existent is the week) that I do not hear someone discussing views on either savings or cost of items while totally ignoring the value of money now vs. whatever time period they are discussing.

The Money Illusion from the Psi-Fi blog

"Money illusion is the trait that causes people to focus on the amount of money they possess rather than it’s worth to them. A hundred dollars a hundred years ago is obviously worth much more than a hundred dollars now: prices have inflated and the value of the hundred dollars is far less than it used to be. Measuring this exactly isn’t possible: what price would a businessman have paid for instant communication across the world a century ago compared to the peanuts we pay for the internet today?

In deciding to ignore the idea of money illusion economics was, for once, joining the mainstream, where most people happily ignore the fact that the value of the dollar in their pocket isn’t what it once was. This leads neatly to a world where there are more unemployed people than there should be, where central banks run around like puppy dogs chasing their tails trying to avoid the dreaded d-word and lots of people end up much, much poorer than they ought to be...."

Read the entire thing here.
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