The Psychology of Economics

Human beings aspire to enjoy as much as possible with the least possible effort...

Until recently, economists asserted that utility could be measured by material possessions. That is, the more we consume, the more we enjoy. This approach has led to our current state, in which the attainment of money is the ultimate gauge of success...

Eyal Winter, Professor of Economics at the Hebrew University of Jerusalem, explains that while it is clear that man should aspire to economic welfare, often defined as “well-being,” classical economics assumes that a person strives to maximize material gains because for most of human history, economic success was required for survival. As a result, a mechanism evolved within us that compels us to obtain the means to survive, which is expressed in money...

While material well-being has evolved as a basic need, many other needs have developed in us over thousands of years of living in social frameworks. One such primary need that formed from leading a social life is the need to give and to receive. Human societies have always worked in cooperation because it enhanced their sustainability...

People measure themselves in relation to their social environment. They then make decisions based on emotions that arise during one’s social relations. In a study of participants in the above “Ultimatum Game,” the participants’ brain activity was monitored while deciding whether to take the amount of money offered. It turned out that in the process of receiving the offer, two different areas were working in the brain—the area in charge of making rational decisions, and the area in charge of anger...

We affect each other in more ways than we realize. Our influence on one another is not only what we see and measure in others—studies show that we “emotionally infect” one another, and are “infected” by them even without noticing it. Beyond the fact that we assess people’s expressions and deduce their emotional states, there are cells in our brains called “mirror neurons,” which respond to other people’s actions by activating the same areas in our own brains, as if we were performing that same action...

These connections become more complicated and more prominent as the world becomes increasingly globalized. The tightening connections among the various parts of the world have turned the human society into a single global and integral system, causing every element to become dependent on every other element in the system...

Sociologist Ulrich Beck wrote in his book, Brave New World of Work, that in the new society, people will conduct “civil labor” to benefit society. Yet, how can such a society bring satisfaction and a sense of fulfillment to people?..

This mechanism of mutual guarantee will diminish and ultimately eliminate social gaps. The guaranteeing of people’s basic needs for a reasonable existence is the key difference between an economy of mutual guarantee and the current economics. We have already seen that individuals have many needs that cannot be met in an environment that does not encourage their expression and fulfillment. The more the social environment presents models of the joy that exists in social relations, in sharing, and in fairness, the more individuals will be able to enjoy life in a society where such relationships are the norm. This is the key to the change...