Mental accounting was mentioned in a theory by Richard H. Thaler, winner of the 2017 Nobel Prize in Economics, who explains how our expenses are irrational, that is, we analyze how our mind can deceive us when taking out a loan, making purchases in a promotion, or even making mistakes when organizing a family budget.
When seeking a loan, we calculate how much we will have to pay each month, but we do not pay attention to the interest rate charged, we only simplify our analysis to satisfy an immediate need. In this case, we asked ourselves: can I pay this amount? If the answer is positive, then the matter is resolved, that is, we made an irrational financial decision motivated by an immediate need.
Richard H. Thaler's studies question, for example, the belief of traditional economic theories that men are rational beings, who make decisions calculating costs and benefits. He created an analysis scheme that describes how we organize and make decisions, creating different accounts in our minds that deceive us and that often make us lose money. And this is explained by habit and lack of time to reflect.
An example of this irrational decision can occur when, although we have access to information about healthy foods, we still often choose unhealthy meals, since haste, habit and convenience push us, in this case, to choose the most unhealthy option.
Thus, Richard Thaler's theory of mental accounting (or psychological accounting) attempts to describe the process by which people encode, categorize, and evaluate economic outcomes. People may have multiple mental accounts for the same type of resource. Thaler shows that we are also influenced by the payment method, since supermarket shoppers spend less money in the market when they pay with cash than with their debit cards (and credit cards), even though both debit cards and cash make the same economic resource. Comparing the price of goods to a smaller mental account (for example, the money in your wallet) than to a larger mental account (for example, the money in your bank accounts) increases “payment pain”.
A detailed application of mental accounting, the behavioral life cycle hypothesis (Shefrin & Thaler 1988), posits that people mentally frame assets as belonging to current income, current wealth, or future income and this has implications for their behavior.
If mental accounting can translate into an irrational decision regarding costs and benefits, on the other hand, accounting is a human science and not an exact one, so, because of this characteristic, it requires understandings and judgments associated with the facts and circumstances of each business and event, but the conclusions must be assertive, so that they are aligned with the conclusions of others affected and interested in the accounting, financial and economic information reached. Today we have international accounting standards, both public and private, for the global standardization of information produced and disclosed by private and public entities.
