- Business Insider spoke to Dan Ariely, James B. Duke professor of behavioural economics at Duke university, and author of “Small Change“.
- Ariely said millennials’ spending habits aren’t necessarily down to their personalities and have more to do with the environments they are in.
- He added that our environment determines our actions, and we’re often put in environments where we are encouraged to spend.
Read the full transcript below:
Dan Ariely: There’s lots of statements around millennials… It’s kind of funny as a social scientist. The brain doesn’t change because we’re in a different year. It’s kind of a funny thing to even think about this.
But there are some interesting differences with different generations, but I don’t think they’re about the individuals, I think they’re about opportunities.
So, think about the housing prices right now in big cities. They basically mean that it’s impossible for somebody at age 25 to get a mortgage and hope to buy a house.
Now imagine we could take millennials, right, take the same people, and basically just change housing prices to housing prices 20 years ago. And now, all of these millennials would take a mortgage. I promise you they would behave just like other people.
But what happened is that there’s a really terrible setup, where we have young people who don’t even have a hope for being able to buy a house. How do we want them to behave?
So I don’t think it’s about millennials being different, I think it’s about the fact they live in a world that lots of opportunities that we had – my generation, quite a few years ago – don’t exist for them. And because of that, they find different ways to deal with it.
It’s so easy to say: “It’s millennials and it’s personality traits” and so on, I don’t think that’s it, I think it’s what the world around is giving them opportunities for, and sadly the world around them is not that hospitable.
One of the things we need to realise is that we are living in a competitive world. One of the findings in behavioural economics and social science is that we make decisions as a function of the environment we’re in.
Now think about it: In your environment, in our environment, who cares about our long-term wellbeing? Maybe us, maybe a significant other, maybe a parent, maybe a religious organisation, maybe the state, but if you think about our daily environment, we’re surrounded by shops and apps and stores and news and advertisements, and all of them are not interested in our long-term wellbeing. They’re all interested in their own short-term wellbeing.
Every doughnut shop wants you to buy another doughnut today. Facebook wants you check Facebook twice more today. My image for this is you walk down the street with your wallet, time, and attention, and everyone wants your money, time, and attention now.
And you know what? They’re good at getting our time, money, and attention and they’re getting better. And because of that, we don’t truly get to live according to our own preferences. The moment you go into a grocery store, the grocery store has a different idea about what you should do with your money that what you do.
And you know what? They design the environment. They decide what’s at the end of the aisle, what’s by the cashier and so on. So part of what we need to understand is that we might have good intentions and plans and so on, but the moment we step up to the world, the world has other plans for our money and often they can control what we end up doing.
Source: FS – All – Economy – News
Millennials are bad with money but it isn’t their fault — a behavioural economist explains why