The Psychology of Everyday Life: Motivation and the Search For Happiness

The Psychology of Money

What are the limits of our own analytic ability?

Despite the remarkable intellectual abilities humans do enjoy, there are clear limits to our ability to analyze economic information. For one, the frontal lobe, the area of the brain that mediates complex thought, has a limited amount of processing capability. The complex cognitive capacities that the frontal lobe provides take up a good deal of energy and calories, and incorporate a large amount of neurocircuitry. In other words, intellectual analysis of financial information is very “expensive.” Consequently, our brain is highly dependent on energy-efficient shortcuts that allow us to process a lot of information very quickly. While these shortcuts allow us to function in the real world, they can also lead us astray. Three cognitive shortcuts that influence our thinking about money include: chunking, sensitivity to context, and the zero-sum game between our emotions and cognition.


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