Every year that Christmas rolls around, I am dizzied by all the advertisements, special sales, and generally frenetic commercial activity. As someone who watches too much TV, the commercials alone can be nauseating, as they seem to take on special “buy me now!” intensity.

Around this time I start thinking (worrying) about how much we Americans save, which by the standards of most industrialized countries is very, very little. Sure, the 2008 crisis and the recession drove up savings rates, as easy consumer credit became more scarce and employment uncertainty worsened. But Christmas-time unfortunately reminds me that too many of us blow our hard-earned money on stuff we don’t need.

Who am I to criticize others’ spending decisions? You’re right if you asked this question. The individual and the family are the most efficient determinants of how to spend their own money, and we’re stepping into dangerous paternalistic territory if we begin to think otherwise.

Nonetheless, why do some people, and in fact some nations as a whole, save more than others? The most common way that economists explain this is to simply assert that people have different preferences. Either they take the savings rates themselves as exogenous (they just are that way), or they assume that people/nations have different discount rates, meaning that some people have a greater preference to consume now as opposed to waiting until later (saving). Of course, in the case of the US, a number of global economic forces result in low rates of interest, meaning the incentive to save is especially low.

If you believe each individual rationally strikes an optimum balance between consuming and saving, then there is no issue: welfare is maximized as long as people are free to make their own decisions. This is the conclusion of basic classical economic models which (intentionally) oversimplify life to make it mathematically useful. But for those of us who understand the difference between elegant models and real life, there seems to be something wrong.

In fact, what Christmas time reminds me of is that psychology plays a huge role in the consumption/saving balance in our lives. And unfortunately the most influential psychological factor is probably product advertising and marketing, not to mention the “keeping up with the Joneses” phenomenon which somehow pushes us to buy things out of jealousy and insecurity. How many of us have yearned for some item, blown a whole lot of money on it, and then quickly realized that it didn’t bring us nearly the level of satisfaction that we had anticipated? In the aggregate, we end up spending too much of our money on useless crap now, leaving less to be saved and invested for the future. In reality (I suspect) we’d be happier if the balance were shifted somewhat away from immediate gratification.

An ad from Acura’s “Season of Reason” holiday promotion. Kudos to the Acura people for humorously pointing out the ridiculousness of holiday overspending. Unfortunately, their solution to this ridiculousness is for you to buy an $80,000 luxury car.

This is one of the contributions that I think the Bahai teachings are destined to make in the world: to counteract the enormous psychological forces pulling us towards a pattern of consumption that isn’t very gratifying, and provide a regulating medicine for the symptoms of consumerism. The Bahai holy writings focus heavily on moderation, detachment, and the rejection of materialism.  These are really universal religious principles that we desperately need to be resurrected and given a boost of spiritual momentum.

This is just one passage from the Bahai scriptures which resonates with me, from ‘Abdu’l-Baha:

The happiness and greatness, the rank and station, the pleasure and peace, of an individual have never consisted in his personal wealth, but rather in his excellent character, his high resolve, the breadth of his learning, and his ability to solve difficult problems. (The Secret of Divine Civilization, pp. 23-24)