The biggest, simplest lie in the world is this - that people, as consumers, as business owners and as government leaders, make rational choices with money.
Everyone knows the opposite is true but no one wants to admit it.
Nobel prizes in economics were handed out over the last 20 years to brilliant academics who came up with gorgeous and elegant statistical models that seemed to make perfect sense about how the economy worked, particularly at the macro level.
These models failed spectacularly in 2008 when economic armageddon nearly struck, leaving us with what's been called the Great Recession ever since as several European countries hover near the brink of fiscal collapse and deficits top $1 trillion (also known as 1,000 billion dollars) in the United States.
The models didn't work because they didn't factor in the truth - that money is the root of all evil and we spend most of our money to satisfy one or a combination of the seven deadly sins - anger, envy, desire, greed, pride, laziness, and gluttony.
Even our hunt for bargains, while it seems logical on the surface, is loaded with lunacy. Some people are willing to drive across town to save 50 cents on a jug of milk, not factoring the cost of fuel and wear and tear on their vehicle, as well as their time.
The best current local example of irrational spending can be found at local gas stations in the last two weeks.
Since Costco opened its gas bar, Prince George gas prices have been in free fall, tumbling 20 cents this month and nearly 30 cents from the summer high of 139.9. Lineups of 15 to 20 minutes have been common, particularly at Costco, but even at service stations whose prices have dropped but always remained two or three cents more. People are taking advantage of the lower prices and stocking up.
Logical consumer behaviour, the kind humans would practice if they were actually Vulcans, would have us doing the opposite when it comes to our fuel spending over the last couple of weeks. Instead of loading up on gas, the smart thing to do would have been for each of us to have bought a little bit of gas every few days, $10 or $20 at a time.
No doubt the people who waited in line and then gassed up last weekend when the prices were in the 120 to 122 range were kicking themselves a little to see the prices fall to 113 to 116 by the middle of this week. Depending on the size of their gas tank, they could saved anywhere from $5 to $10 to fill up their vehicle if they had only waited a few more days.
When prices are falling for any commodity and all indications are they will continue to fall, patience is a virtue. The best bet is to buy a little at a time so you're able to take advantage of the the same or even lower prices tomorrow or next week. To save money, you should spend just a little at a time.
But greed and anger get in the way. We want to save a whole bunch on gas NOW and we want to stick it to those price-gouging, money-grubbing oil and gas companies NOW.
Everyone heading to the gas station at the same time to take advantage of low prices increases demand and increased demand eventually leads to higher prices, which leads to the second rational spending response.
When prices start increasing again, the lineups will disappear and many of us will go back to buying gas $10 or $20 at a time, grumbling about the good times gone, but in a rational spending frame of mind, that's the time to stock up on gas because you can be fairly sure that the price of gas will be the same or even higher tomorrow or next week. To save money, you have to spend more.
Most people don't think gas prices make sense but the real nonsense is the way we think about gas prices and the spending choices we make. We're too busy fooling ourselves to see what's really going on.
-- Managing editor Neil Godbout
