Matthew Lara

ECO2023
My Reflection about “Mind Over Money”
"Mind over money" was a very interesting documentary about how people's behavior
and mentality can affect the economy. It shows about the two mentalities that exist in
the management of the economy: the rational (the economy is more mathematical,
traditional, seeing the management by the current situation) and behavioral (the stable
management of the economy depends on the psychological attitude of people, based on
situations that affect their lives). These two types have marked the management of the
economy in a way that has led to different situations, especially in times of crisis such
as the great depression or the 2008 crisis, starting with a previous period mostly
managed by rational economists, who try to manage the market in a more mathematical
way thinking that prices and the trade would continue to rise as long as there is a self-
regulation of the stock market, until the moment of the "crash" when prices began to fall
to reach a value well below what was being sold ("real price"), until more "behavioral"
measures are taken in which include some control of the market by the market, so that
prices do not inflate so much, while showing how people see when to buy a certain
product or service, which regulates and stabilizes the market.
Analyzing both types of economics, I would say that the behavioral economics is the
most convenient, because it better demonstrates the risks that could be depending on the
attitude of the consumer in the situation he is in; you can see what price is the most
comfortable and thus know when to make ups and downs, generating regulated but
more efficient earnings. This was shown in the differences of stock exchanges that
existed (the one with more knowledge of Chicago versus the one that was more
behavioral), where the control of the situations was stronger in the behavioral one than
in the rational one, trying to look for good incomes with less risks.
Different experiments have been conducted to test people's price behavior and their
willingness for something they want, both by sellers and traders. I consider my favorite
one to be the trading simulation, which shows the real functioning of economic bubbles,
by increasing the asset by trading with it while its value is falling over time, to finally
show that there is a moment when nobody wants to buy at the price it is placed and that
makes it fall, as happened with the wall street crashes in 1929 and 2007. As well as
other important ones such as the experiment of the auction of the 20-dollar bill, which
shows that there are many things that can be bought above the price at which they
should be, or the experiment of the calculated expenditure and price of a bottle after
watching a sad scene of a movie and listening to relaxing music, which shows that
people can spend more money when they are sad.
Something that struck me significantly was the mood, and that is that if we are sad, to
calm our need more quickly, we can spend more money itself. I believe that not only in
sadness, but also in other emotions, being in our extremes. In euphoria, due to the strong
feeling of happiness that we have, we can do things to which we give a minor interest,
including spending more money on something or "squandering" it for the emotion. An
example I can give in the Peruvian highlands, where they organize "las yunzas" a kind
of party where a host puts a lot of money for banquets, gifts, comforts for guests, etc..
With sums that can reach up to 80,000 soles, but the feeling of shock to the person does
not reach him/her so much, and it is not because he/she is someone with a lot of money
(any type of people can organize it) but because of the feeling of happiness that there is
in the party, which makes him/her not care so much. In a personal memory different
from this, when I went to New York I was walking through times Square on my first
night when a crumpled green bill falls from the heights of a skyscraper, and I ignored it
thinking it was fake, but an uncle of mine picked it up and saw that it was real, and that
is because it is an area where different types of events are organized, several of them
exuberant parties, people there are in an intense atmosphere of happiness that leads
them to do acts like that. I can also see it when there is desperation, to calm our need
that is necessary and to help us from a terrible problem, like going in an emergency
ambulance. An emotion that I have not seen at all is anger, and that is when we put up
too many walls at that moment that we no longer want to accept at that price, until the
very moment when it is combined with despair and we feel that it is the only solution.
On the personal side, I must say that since I was a child, I was taught the culture of what
to spend and what not to spend. At the beginning I didn't give it much importance, I
thought I had to live with what I had and spend it on whatever I wanted. If I saw that
some school friends had such a video game, I wanted it too; if it was a delicious dessert,
I wanted it too; as well as one thing or another, but what does it have to do with
spending? if my parents or someone did not give me, I paid for it with my savings (if I
could); and it was an instantaneous feeling that I paid attention to satisfy it, but then I
realized the consequences when I saw that there were other more important things that
could be spent later, with more savings or at a lower price. That is why I started to put
into practice the savings, and the right moments to buy something; and that is how,
measuring well, I was able to spend on things that would be more useful to my life. As I
said before, my parents taught me that, and it makes me remember the moments of
important purchases, like when they bought the apartment in which we live in full
recovery of the mortgage crisis in 2010, when we decided to take a trip, or when they
thought about buying a new car a few months ago, since the ones they have are more
than 10 years old, and when they went to a fair of dealers to see the prices, they saw that
most of our preferences exceeded the amount they could pay, all this due to the price of
metals and other things, as effects due to the initial rise of gas and oil at the beginning
of the year, prices went up, so my dad said "we have to wait for this to pass a few more
months, so the price can fall and it will be a better time to buy" and now the gas has
gone down, which I hope will influence other prices, so there will be a better time to
invest in the purchase of a car. If I know now that money can activate the pleasure
centers, I don't think it will change completely, since I know that there will be things
that we want to do when "we have the money" (or they will generate money) but
knowing the knowledge of knowing when to spend on what and when not, is what
makes me have in front of that pleasure, a reason to see "not right now, but later I think
it will be better", the right time to spend on the target, and I think that is important when
we have moments with the pleasure that money generates in us. It reminds me of when
the Russian invasion of Ukraine started and the share prices of Russian gas companies
started to fall as a counterreaction to the conflict, my older brother, who likes to invest
in stocks, saw that it was a good opportunity to invest in a Russian company called
"NOVATEK". Weeks after the war started, the values of these companies started to rise
again, and he was able to generate "a good investment".