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WITH THE SURGE of urbanization in the 19th century, many folks became concerned by the seeming rise in bad behavior. This behavior could be illegal—such as theft—or legal but undesirable, like alcohol abuse.
Nascent social sciences, including sociology and psychology, developed two alternative theories. “Moral Deficit” theorists said people engaged in bad behavior because they were internally “weak.” You might have seen a movie scene where a hysterical person is slapped with the admonition to “get a hold of yourself.” Or you might be familiar with the approaches of The Salvation Army and YMCA, both of which use Christian principles to teach people how to strengthen their mind, body and spirit.
On the other side was “Moral Purity,” or the belief that temptation could bring down even the strongest person. These theorists advocated attacking supply rather than demand, most famously by initiating Prohibition.
Over a century later, our debates seem all too familiar. For the “war on drugs”—or any other “war on…”—what’s the best approach? Do we address demand through education or, instead, should we attack supply by going after its purveyors? Or do we just conclude that the behavior is innate and not worth resisting?
Like many social concepts, these same principles can be applied to microeconomics and even personal finance. Why do we overspend? Are we weak, with an uncontrollable desire for admiration that impels us to buy all the trappings of success? Or are we simply inundated with too many nudges to spend, and can’t resist the siren call of consumerism?
Even more confusing, what’s the solution?
Perhaps a better approach is that of another early reformer, Jane Addams. As part of the settlement house movement, Addams avoided focusing just on the isolated bad behavior. She advocated looking at the whole person, even the whole society, to see the conditions that led to the rise of undesired behavior.
Considered the founder of modern social work, Addams believed in a holistic approach. Bring together all different classes of society to work together. Teach struggling people skills so they can lift themselves up. Have government and other overseeing entities support and protect the path of opportunity.
In terms of personal finance, Addams’s approach would not just focus on the bad behavior, such as overspending, but look into its root causes. What are the conditions that are reinforcing spending? Are we poorly trained at making budgets? Are we trying to match a lifestyle that society expects of us?
Perhaps if we stop and look at the bigger picture, we’ll realize that spending today is borrowing from our future self. Perhaps, to overcome our failure to save, we can tap into our desire to have enough money to help loved ones.
This kind of “‘mindset training” is at the heart of many financial and media literacy programs in schools. For anyone past school age, it’s never too late to learn. If someone eats a poor diet, we should look at what’s behind it, mentally and physically. Ditto for all other types of consumption.
Is there solid empirical evidence that “mindset training” actually works?
Two good articles about the validity of mindset training.
Debate Arises over Teaching “Growth Mindsets” to Motivate Students
Research shows conflicting data on the impact of the intervention, but a major new study confirms it can work
https://www.scientificamerican.com/article/debate-arises-over-teaching-growth-mindsets-to-motivate-students/
A national experiment reveals where a growth mindset improves achievement
https://www.nature.com/articles/s41586-019-1466-y
Great question. The short answer is yes for many, such as here: https://www.cambridge.org/core/journals/journal-of-pension-economics-and-finance/article/abs/an-empirical-study-on-how-financial-literacy-contributes-to-preparation-for-retirement/C3700A17B1ED16E3FEDF616EAD4C187F
Now, there is a whole range of conditioning and training programs, so it’s impossible to say blanket-wise they are good and bad. Second, we are dealing with social sciences, here psychology and economics, and there are many confounding variables. Each individual comes to a suggested technique from different circumstances and with different motivations, temperaments, etc. I used to distinguish social and physical sciences by saying that if I dropped water balloons on students from the top of the school, physical science has it easy because all balloons would accelerate at 9.8 m/sec2 (at sea level), but my motivation, aim, care, etc. would vary for each student.
Finally, while “mindset training” is a very amorphous term, it includes education, which we have pretty much staked our civilization’s continuation on, so let’s hope it does work!