One of the questions we discussed at the latest Marketplace Money segment interview I did with Jim from bargaineering.com and Lynnae from beingfrugal.net was whether this crisis would make people change their money habits. I offered up my opinion that if the Great Depression didn’t permanently change habits for the long term (and it didn’t – just for one generation) – why would the Great Recession?
I’d like to think that people (including myself) are responsive enough to negative stimuli to stop certain behaviors. Eat too many Doritos? Get fat. Therefore, don’t eat Doritos. Short term tasty gain is outweighed by increased clothing costs, health costs, unattractiveness opportunity costs, etc. Yet you don’t see people laying off Doritos.
I’m sure that all the statistics bear out the fact that in the short term people are massively increasing their savings and paying more attention to their retirement savings, practicing frugality and laying off the Wii purchases. Well and good. Will that behavior still be the norm in 2011? Check back with me then if I’m wrong, but I don’t think so. I think within one or two years we’ll be back to the same insane treadmill, and we’ll be inflating the next bubble. Dot coms and real estate are played out, so maybe it will be biotech… green energy… whatever it is, someone will pump it up and reality will deflate it.
If you think people are capable of change, just look around at the five people closest to you. I am willing to bet at least two of them have terrible habits that they will not (or cannot) change. You can’t blame us. I have horrendous fears of the future, for example. It’s a part of my nature by this point in my life. I can’t stop worrying about the future any more than I could forget how to ride a bike. But the same thing is true of personal finance. If you think that the crisis is going to permanently change spending habits, I have a bridge that runs from Manhattan to Brooklyn to sell to you.
I believe in the human race – it’s a fundamental part of my theology. I think humans are basically good and strive to improve, and that the race – as a whole – is moving toward a more (but never completely) perfect state. I’d like to think that this crisis is the starting point for the evolution of a “new thought” in money – people will be more frugal, reject consumerism, support sustainable manufacturing, etc. and etc. ad nauseum. Will they? I doubt it. I know from my own experience that wishing for change, and embracing that change short-term, are a long way from living the change long-term. It’s possible – but, I think, not likely.