The Psychology of Money

Money is something that has been present in societies for a long time. Belief is an integral part of what makes money valuable. The belief that what we exchange for goods and services is valuable comes from the sense of security it affords. For centuries, civilizations used precious metals like silver and gold as currency. Nothing about these metals was intrinsically valuable, they were simply assigned value based on their looks and the effort needed to obtain them. Today we have many similar things the US dollar, in-game currency, and the Fei of Yap. Money is an essential part of human nature, the psychological effects it has on us are numerous and every person to some extent is affected by Money. 

The Fei hold value to the people of Yap because of their lack of precious resources that other civilizations would use for money. According to “The Island of Stone Money” by Milton Friedman (1991), it is brought up in the document that because the Fei are as large as they are, the islanders of Yap would strike up bargains to agree that a specific fei now belonged to whoever made the deal and the fei would stay in one place (Friedman, 1991, 2). This type of bargaining and agreement is similar to how modern banking systems operate. The belief of the islanders in the monetary system was so strong that when the German Empire, who took ownership of their island in the late 19th century, laid claim on all the fei around the ill-repaired roads. The islanders gave in to the demands to repair the ill-begotten roadways almost immediately. While the monetary system of Yap might at first seem strange it is certainly in line with what almost every modern nation and banking.  

For decades, Brazil’s economy was in a bind, its inflation rate was at such an exuberant amount that citizens had legitimate fears of all their money becoming worthless. This topic is the focus of “423: The Invention of Money” a podcast headed by the team Planet Money (2011) and specifically Act One “The Lie that Saved Brazil” by Chana Joffe-Walt. The inflation rate of Brazil in the early 1990s was at on point 80% per month. The people of Brazil had been living under economic conditions like this for decades, living with the consequences of the economic downfall of the Brazilian government (Planet Money, 2011, 12:16). The URV was the eventual fix to Brazil’s problem and it was a masterwork of smoke and mirrors. The URV, unit of real value, was the work of four Brazilian economists with two of them Andre Lara and Edmar Basha being interviewed for the podcast “423: The Invention of Money”. The plan these men came up with was to implement a new value system for banking, the URV, and to conduct business on their terms as well. The populace would still use the original currency, the Cruzeiro Real, and that would then be compared to the value of the URV. This means that while the Average Joe of Brazil would be receiving URV as payment and using them for taxes and such, the cruzeiro would still hold value as a daily conversion would be published  (Planet Money, 2011, 23:00-24:35). That was how Brazil planned and succeeded in stopping hyperinflation through the obfuscation of the cruzeiro and the temporary patch of the URV until the people of Brazil learned to accept the staying power of their money. The situation in Brazil is similar to what would later happen in the USA in 2008. During the housing crash, the Federal Reserve started to accept many things it would never have prior such as cheap plastic earrings (Planet Money, 2011, 40:30-40:35).

In-game currency in a way is similar to the URV of Brazil. They both are virtual currencies used in lieu of straight and standard purchases. They aim to disguise and hide how much one is really spending by confusing the customer by throwing them off balance with an unfamiliar monetary system. In “The Perils of In-Game Currency” by journalist, Jamie Madigan (2019) the psychological aspects of using a foreign currency are discussed at length on how people will use it in comparison with the money of their homeland. Psychologically money is an important thing to people all around the world and one way to dissociate someone from their value system is brought into play by Madigan, “You can, for example, disconnect the act of paying from the act of receiving in the mind of the shopper and make them willing to spend more” (Madigan, 2019). A silly little in-game currency is exactly what this is and many developers and publishers today are prioritizing these sales. It is an excellent sales tactic, but terrible for the consumer. This idea is prominent in the article “Smash Bros. Ultimate Lets You Spend Money on In-Game Currency” by video game journalist, Josh Coulson. The industry-wide standard of microtransactions plays into the attempt at taking away the conscious value we have of our money, another problem is that many of these games are also played by children who have potentially not developed our society’s importance of money. This idea of microtransactions is also grinding the gears of many people because some of these games can cost $60-$70 brand new which is the industry standard (Coulson, 2019). Young children often are loured into these transactions for appearance-altering items and characters which are often thinly veiled slot machines. 

Money is an important process in the modern world, while money cannot be grown on trees it often feels like it does with how products and expenditures are pushed upon us. The psychological nature of how people view money often reflects in what and how they spend their money. Whether that be through the faith-based system of Yap which takes on the appearance of some sort of proto-bank or even the URV of Brazil in their attempt to curb the hyperinflating tendencies of the populace.  

References

Coulson, Josh. (2019, Nov 8). Smash Bros. Ultimate Lets You Spend Money on In-Game 

Currency, Smash Bros. Ultimate Lets You Spend Money For In-Game Currency 

(thegamer.com). Accessed 21 Sep. 2023.

Friedman, Milton. (1991). The Island of Stone Money, stonemoneyessay.pdf (wordpress.com). Accessed 11 Sep. 2023.

Madigan, Jamie. (2019, Dec 19). The Perils of In-Game Currency. Forbes. The Perils of In-Game Currency (forbes.com). Accessed 20 Sep. 2023.

Planet Money. (2011, Jan 11). 423: The Invention of Money. This American Life. The Invention of Money – This American Life. Accessed 11 Se. 2023.