Money, emotion and the brain

Money, emotion and the brain
05 May 2013

The brain is a fascinating complex ‘thing’ but we still know very little about it, or shall we say we know little about the ‘mind.’ But neuroscience has made great leaps in understanding more about the brain in recent years and now researchers are showing that through programs which teach people knowledge of how their brain and behaviors work, they are more likely to overcome self-defeating habits, and begin to fulfill their potential. 

One thing is for sure: Your brain, like mine, is far from the consistent, efficient, logical device that we like to pretend it is. In fact as author Jason Zweig has so brilliantly stated: “In all its messy, miraculous complexity, your brain is at its best and worst -- its most profoundly human -- when you make decisions about money.”

Debunking some myths

Many years ago Descartes (1596 – 1650) proscribed that the mind was rational, a matter of cognition only and of ‘pure reason,’ this philosophy has held firm for hundreds of years, to the extent we believe when we think emotionally it is irrational. However, neuroscientist Antonio Damasio, in his much cited work; Descartes Error: emotion, reason and the human brain, indicates that all our decisions, even the ‘rational or optimal ones’ are imbued with emotions.

Damasio and his colleagues show that people with damaged brains, who do not display emotions, cannot make good decisions; “an inability to be guided by a ‘healthy fear’ of bad consequences” is disastrous when it comes to decision making.

We need the sway of emotions to help us decide one thing is better than another.

Your money and emotional state

Psychologists Berridge and Winkielman studied the impact of emotion on consumer spending behavior. In one experiment they asked participants how much they would pay for a drink. On average, one group would pay only 10 cents; the other was willing to pay 38 cents. The only difference between the two groups: The one that paid the least had been shown a photo of an angry face for less than one-fiftieth of a second --a visual exposure so brief that no one was conscious of seeing it, the researchers call this ‘unconscious emotion’ -- while those that chose to spend 0.38 cents had seen a photo of a happy face for the same split second. None of the participants was aware of feeling happier or more anxious. But, for a period lasting approximately one minute, their behavior was governed by the unconscious emotions generated by these subliminal images.

Nearly all of us feel happier when the sun is shining than when the sky is gray; could this answer why there is an abundance of overconsumption in the UAE?

And, is it any wonder advertisers seek to make us feel good, especially through subliminal messaging!

Whilst we may not make good decisions without emotion we do need to be aware of our emotional state, especially when parting with our hard earned cash.


The traditional view in economics is that decisions are made after careful deliberation of costs and benefits, when did you last do a cost and benefit analysis when spending your money and time? Rarely, I guess. The science of neuroeconomics  has shown the impact on our brain, the areas that light up, when we are presented with environmental stimuli, and how unconscious and emotional factors drive our choices, especially with money decisions.

Neuroeconomists have highlighted an area in the brain known as the ‘reward system;’ in psychology, a reward is anything positive which makes a behavior more likely. Rewards can be as basic and fundamental as food, or as abstract and intangible as intellectual satisfaction. Surprisingly, all these different rewards -- food, sex, love, money, music, beauty --appear to use the same neurological system. Moreover, the pathways of this system all transmit the same chemical signal: dopamine.

Dopamine is a neurotransmitter that feeds the reward system; people addicted to gambling, drugs and other less socially acceptable issues, may in fact have too much dopamine. An imbalance in an individual’s dopamine system can easily lead to greater risk-taking, and of course can lead to poor spending behavior.

You read that right, the part of our brain that gets reward through spending behavior is closely correlated with the part of the brain that gets ‘reward’ with cocaine addiction. In either case dopamine is released into the brain, reinforcing the behavior.

The more you spend the more the emotional reward. But is it good for you in the long term? The key is to overcome the expected immediate reward with awareness of a bigger reward in the future. Alternatively we can dumb down our immediate reward expectations by numbing the feeling, thinking twice and counting to ten.

Think twice and count to ten

Now we have an idea what goes on in our brain, and that emotion always plays a part, what can we do?

Well here’s the thing, knowledge alone does not necessarily lead to action, but I am in the camp that says better knowledge of what goes on in our mind and body helps us understand and change behavior patterns that may not be in our best interest.

Whenever you sense you are about to spend money (which you may not have planned), you should be able to say to yourself, 'I should walk away and play with my kids for an hour and then think about it.' If you don't have kids to distract you, take a walk around the block or go to the gym – and reconsider when the heat of the moment has passed and your anticipation reward center has cooled off.

As cliché as it may sound, just like clenching your fist or gritting your teeth and walking away, counting to ten is a good way to move from being swayed by subliminal messages and emotion. When your emotions are running high, take a time-out before you make a hasty decision you might regret later.

Even the most minor, momentary changes in your mood can make a huge difference in how you act on the spur of the moment.

What strategies do you use to lower the dopamine levels and emotion before possibly behaving irrationally?


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Head of Behavioral Finance
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