The Psychology of Inflation: What Makes You Say, “No Way Am I Paying That”?

September 28, 2023

by Charles Hugh Smith Of Two Minds

Value varies. Invest in what’s valuable.

It’s a well-recognized human bias to feel losses more acutely than gains. Perhaps something similar occurs with inflation. As essentials soar in cost–i.e. non-discretionary expenses such as shelter, food at home, utilities, childcare, healthcare insurance, etc.–our only response is sighing resignation: yes, it’s a ripoff but there’s little we can do about it without making major changes in our lives.

Discretionary purchases are a different matter. The pleasures gained by the purchase are significant enough to be worth the financial cost. But at some point–a point that varies with each individual–the cost is so high that the pain of that expense outweighs the pleasure of the purchase.