Psychology and the economy

• The economy is the production and consumption of good and services.
• Psychological theories are applied by governments and companies to improve how the economy functions.
• Maternal deprivation demonstrates intellectual, emotional and physical development that can be negatively affected by deprivation.
• Maternal deprivation - Influence on the economy:

  • Midwives use psychological knowledge gained about the development of needs of young children when giving informed advice to expectant mothers.
  • Hospitals have improved their policies on visitation hours, allowing young children to have physical contact with mothers.

  These changes improve the development of children and so the economy as adults are more likely to be more productive as adults and better adjusted to the demands of adult life (less likely to need costly mental health support).
• Social influence - Obedience and conformity demonstrated how situational social pressures could influence behaviour. Organisations (eg government) have used this to influence the behaviour of their citizens. The nudge unit (Behavioural Insight Team - BIT) is working within the UK government to apply psychological principles.
• Social influence - Influence on the economy:

  • Nudge unit working for HMRC sent letters to people who didn't pay their taxes and these included statistics showing the majority of people paid their tax on time and not a part of the minority group. This was highly effective compared to a simple reminder. This increased taxes paid within 23 days by more than £1.6 million.
• Conditioning - Social media. Behavioural theories of classical and operant conditioning explain how to shape and even change human behaviour.
• Conditioning - Influence on the economy:

  • Social media and computer game companies can manipulate their uses to engage with their product by providing virtual rewards (eg likes and followers). These can result in compulsive use which allows companies to display more adverts, and make more money.
• Neurotransmitters - Drug treatments. The action and imbalance of neurotransmitters are linked to mental health conditions (eg anxiety, depression, OCD and schizophrenia).
• Neurotransmitters - Influence on the economy:

  • Development of cheap and effective drug treatments has allowed people to have reduced symptoms and return to everyday life, including work. This improves the economy by reducing the cost of the NHS, improving workers' productivity at work and increasing the number of workers paying tax.
• Memory - Justice system. Research, such as Loftus and Palmer in the use of EWT may have serious limitations in court. Cases depend on EWT alone which can result in miscarriages of justice due to misidentification. Police are now trained to avoid leading questions and post-event discussions. The cognitive interview also helps in gaining more accurate EWT and convict the guilty person.
• Memory - Influence on the economy:

  • When applied to criminal justice systems, it improves the economy by reducing the cost of imprisoning people who are guilty, reducing crime rates.