…we (me and my family members) think in terms of fractions when dealing with large numbers and differences when the numbers are small.
If I understand you correctly, I think “people don’t easily comprehend the significance of increasing orders of magnitude” is a better way to frame it. To use iii’s examples, people perceive a coffee that costs 5 as being 1 unit more than a coffee costing 4. But when comparing two cars costing 40000 and 50000, the human brain tends to just latch on to the most significant digit, and starts to see it the same way: just one unit more.
Tangentially, given our brains’ difficulty processing large numbers, I wonder if this effect leads to money management skills being worse on average in economies with smaller base currency units, such as the Japanese Yen, Indian Rupee, South Korean Won, or for an extreme case study, the Iranian Rial, which currently exchanges at 49,313 IRR ≈ 1 EUR. When your haircut costs 1200000, a new phone costs 18700000, and a new car costs 1331400000, it’s hard to judge the weight of your decisions. When the slightly nicer car costs 1645200000, it’s near impossible to notice that you just spent your coffee money for an entire year (~5 days a week for 50 weeks) on a moonroof and Apple CarPlay. Not sure if that example is applicable to the average Iranian, but eh.
Money is earned linearly, not logarithmically
Orders of magnitude are super important for us (well, most people…)
This could use some explanation and layout of the implications.
Hence why I keep one of these in my selling satchel:
All my homies use a circular one:
How would that work? Like these ten apples are equal to 2 bags of oranges?
Guessing they mean;
A 5 EUR coffee is 1 EUR more than a 4 EUR coffee.
A 50000 EUR car is 5/4th or 125% times a 40000 EUR car.
125% times
…is the most cursed thing I’ve seen all day. Especially so when you realize that when you convert it to a decimal of 1.25, the sentence is completely correct. Bravo. 😅👏
In my native language % means “per cent”, meaning per hundred.
So it reads as 125 per 100 times 40000.
Is that not the case in English?
I’ve never seen anyone write it like that in English. It is understandable when you explain it, but it would normally be written simply as 1.25
I’d think the opportunity cost is easier to realise with the absolute difference in currency units. The price of any alternatives you might consider is usually specified in currency units.
The only relative that I’d think might be helpful for expensive purchases would be to convert a price orrice difference into number of days/ week / months of your expected disposable income or something like that.
