I’ve been somewhat obsessed with the finances and the concept of happiness for most of my adult life. I am always thinking about these two issues and spent alot of time thinking about it during the past few years’ housing bubble. Why were people so obsessed with the idea of “owing” four walls and a roof? What does owning a house really do to one’s self worth?
My husband recently sent me an article entitled “The Psychology of Subprime Mortgages.” Here is an excerpt:
The best evidence for this idea comes from the lab of Jonathan Cohen. Cohen’s clever experiment went like this: he stuck people in an fMRI machine and made them decide between a small Amazon gift certificate that they could have right away, or a larger gift certificate that they’d receive in 2 to 4 weeks. Contrary to rational models of decision-making, the two options activated very different neural systems. When subjects contemplated gift certificates in the distant future, brain areas associated with rational planning (the Promethean circuits of the prefrontal cortex) were more active. These cortical regions urge us to be patient, to wait a few extra weeks for the bigger gift certificate.
On the other hand, when subjects started thinking about getting a gift certificate right away, brain areas associated with emotion - like the midbrain dopamine system and NAcc - were turned on. These are the cells that tell us to take out a mortgage we can’t afford, or run up credit card debt when we should be saving for retirement. They are our impulsive pleasure seekers, the hedonists inside our head.
By manipulating the amount of money on offer in each situation, Cohen and his collaborators could watch this neural tug of war unfold. They saw the fierce argument between reason and feeling, as our mind was pulled in contradictory directions. Our ultimate decision–to save for the future or to indulge in the present–was determined by whichever region showed greater activation. More emotions meant more impulsivity.
And then Jim Kunstler pontificated a bit more:
At the other end of the storyline are the many sad people who were the initial dupes in the racket: the poor shlubs who signed “creative” mortgage contracts to become notional home-owners and thus achieve their spot on the first landing of the American Dream staircase. I say “notional” home-owners because somebody who “buys” a “product” such as chipboard-and-vinyl McHouse with no money down is not really an owner of anything but rather a kind of glorified renter stuck with the additional burdens of paying property tax and maintenance costs for something really owned by another party (a notional landlord). And, of course, we all know by now that the payment terms for these loan contracts were slippery sliding indexes which uniformly tended to slide upward as interest rates re-set above the ludicrously low levels of 2003 - 2006.
I like it when people put into words what I’m thinking, in a much better way than I ever could.
