Many peoples problem "nowadays", Money Illusion

[buckysaccord93]

I would like to discuss, people and there spending. Not of what they spend it on, or how much they spend on stuff.. I would like to discuss the complaining of the cost of things they spend there money on.

You always hear people, (and I am very certain theres some of you here) . That complain about how stuff is so expensive or how all the prices are going up compared to other years.

Well let me Explain the situation to you.. It's a theory.. a Theory called "Money Illusion",

Money Illusion- The use of nominal dollars rather than real dollars to gauge changes in one's income or wealth.

Even these people whose nominal income keep up with inflation often feel oppressed by rising prices. People feel that they deserve any increases in wages they receive. When they later discover that their higher (nominal) wages dont buy any additional goods, they feel cheated, They feel worse off, even though they haven't suffered any actual loss of real income. This phenomenon is called Money Illusion. People suffering from money illusion are forever reminding us that they used to pay only $5 to see a movie or $20 for a textbook. What they forget is that nominal incomes were also a lot lower in the "good old days" than they are today.

just for reference:
Nominal income: The amount of money received in a given time period, measured in current dollars.
Real income: Income in constant dollars; nominal income adjusted for inflation.

My class and I had a long discussion on this problem with our professor during class. And if you can make sense of it. You really do understand its not the government, or companies, trying to rip you off. Not saying there isn't companies that aren't ripping people off.

[Macaqueistrong]

So they are basically taking what they make today and comparing it to prices of goods years ago, and in retrospect they dont realize that back then they were making way less then what they do today. Therefore giving them the illusion that today prices for goods have inflated tremendously?

[wherm]

good read

[buckysaccord93]

So they are basically taking what they make today and comparing it to prices of goods years ago, and in retrospect they dont realize that back then they were making way less then what they do today. Therefore giving them the illusion that today prices for goods have inflated tremendously?

Yes, that's a perfect way to summarize it.

I mean yes granted 7.25/hr will not get you very far, but if you compare it to before its the same as making 5/hr in 1970.

[Macaqueistrong]

I do beleive progression is a variable that can't be ignored in this issue. Look at the way of life back then and compare it to now. American standards have changed drastically. A simple life is no longer desired, and many more people are living beyond there means. Each year is progressively getting worse than the previous and the demand for more money makes everything else more valuable. We strive for that next raise or promotion to get an extra $4 dollars an hour, but the cost of everything we want raises $4 dollars a minute. I don't know of a single item that has decreased in cost over the years, which makes it easy to understand why people complain of the cost of living today.

[buckysaccord93]

I do beleive progression is a variable that can't be ignored in this issue. Look at the way of life back then and compare it to now. American standards have changed drastically. A simple life is no longer desired, and many more people are living beyond there means. Each year is progressively getting worse than the previous and the demand for more money makes everything else more valuable. We strive for that next raise or promotion to get an extra $4 dollars an hour, but the cost of everything we want raises $4 dollars a minute. I don't know of a single item that has decreased in cost over the years, which makes it easy to understand why people complain of the cost of living today.

Yes, but people put themselves in those situation by looking at a dollar like it was 1970. but also you are correct that people no longer are happy with a house/car and small family. people want luxuries, more than they want the necessities in life.

[Macaqueistrong]

You are exactly right, and what I was talking about above was luxuries. Most household items are fairly priced.....

[buckysaccord93]

You are exactly right, and what I was talking about above was luxuries. Most household items are fairly priced.....

Yeah i agree with you 100% perfect example...iphones... luxury.. everyone wants to pay top dollar for..but later complains about the cost..

[fatboy1185]

No big screen tv no care.

[wed3k]

i love when people complain, it makes me feel so much more superior than them because i know how to GET OVER IT.

like gas prices, what are you going to do about it? nothing...so why even go there. put your mind towards something productive and/or money making and make enough so you dont have to worry about your finances.