Spending: evidence versus emotion

In our materialist consumer society, no doubt Christmas 2010, like its predecessors, resulted in a spending orgy. Thus, today I write of the results of two Australia Institute [1, 2] surveys. The first survey [3] revealed that in 2009, six million Australians received one or more presents they never used or later gave away, representing a staggering A$798M waste of money and resources. This survey also found that 25% of Australians gave presents to people they would prefer not to. And about 25% of these reluctant givers were unable to pay their credit card in full each month. Or maybe not: for the second survey [4, 5, 6] showed 14% of Australians have a credit card debt and simultaneously hold money in a savings account. Given that the credit card balances interest rate’s several times the savings account interest rate, this behaviour’s irrational (at best, and stupid at worst). But these 14% do it anyway. This second survey also shows that only 22% of Australians belong to the species Homo economicus [7] – who seek out relevant information and ensure they pay low utility prices, bank charges etc. The other 78% are subject to a range of behavioural biases that can result in financial detriment, e.g. word of mouth, overconfidence, obliviousness. And of course many people are just overwhelmed by the difficulty and complexity of it all. Me? I’m a Homo economicus. But the survey showed that older people tend to be in this category. Ho hum.