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Obama, money, and the recency effect

Obama’s tactics this campaign season have mostly involved not addressing the rumors circulating the Internet and the country about his beliefs and background. But that’s changing (he recently put up a website to address them), and it’s a good move to increase his chances of winning the presidential race. This article discusses how it’s important for Obama to respond to smear tactics in the current presidential campaign because if he doesn’t, voters hear only the accusations, and will tend to give credence to them.

Why? Because people really do believe what they hear, especially if they’re predisposed toward it (such as the many people who don’t want Obama to be the next president). Almost everyone–mentally disturbed people are the biggest exception–assumes that what other people say is the truth. This is why it was so easy to alarm your mother by telling her you’d lost your brother on the way home from school, or get your friend to believe that you were only taking her to a friend’s house to pick something up, not to bring her to her surprise party.

Aside from people’s tendency to be credulous, the recency effect is also in play. The recency effect is the phenomenon that people tend to remember the last few items of a long list best. Its corollary, the primacy effect, states that people tend to remember the first few items best, and which one predominates depends on the situation. Sometimes it’ll be both. But when it comes to persuasive arguments, one or the other generally wins, and the recency effect comes out on top when there’s an appreciable delay between the first message and the second–such as when campaign ad #1 runs on Thursday, discussing a candidate’s platform, and campaign ad #2 runs the next Tuesday, smearing that candidate and calling his or her platform a lie.

How does this apply to personal finance? Don’t let yourself be swayed by whatever you hear, especially whatever you hear last–especially when it’s from a salesperson or someone else who stands to gain by your decision. There are many places this can happen, and many topics. It’s best to invest in foreign markets; it’s best to invest in domestic markets. You need to keep six months’ salary in your emergency fund; you only need three months. It doesn’t make sense to make high-interest payments on a big-screen TV; but the payments are only $80 a month.

How and when you receive persuasive messages will affect how much they affect you. Pay attention to how information changes your opinions. If you find yourself being swayed too much, try reviewing what you know of each of your issue’s positions in the same interval, then decide what you think is fact and what is only opinion, salesmanship, or fear-mongering.