Psychology and Commerce

In the early twentieth century, Atkinson noted that psychology was a young science at the time, and that it had only been within the past few years that the topic had garnered any interest at all in commercial affairs.   Psychology was considered a very immature academic subject and as such it was (justly) regarded as an academic bauble with no importance to real-world affairs.

However, it was the methodology of the psychologists that soured business on psychology – Freud, Jung, and others of that time took a fanciful approach to the subject, and their “study” on the topic seemed more in the nature of mythology and mysticism than science.   More sober minds had more rational approaches to the topic, but the field itself was poisoned by the shamans of psychology.   Those who paid attention realized that behind the showmanship was something of genuine importance: the study of human behavior and its motivations.

All business is based on the interactions among people.   The buildings, machinery, and ledgers were all merely vehicles through which people interacted with one another.  In essence, a business consists of a core group of people (the employees of the firm) interacting with other groups of people (suppliers, investors, customers, regulators, etc.) to pursue their mutual interests, recognized and motivated by their desires.   Given this, it is more than merely beneficial to understand how people think and what motivates them to take action – it is foundational.

It was also during the early twentieth century that psychology became prescient.  Until then, the means by which most people survived was an interaction between man and nature – while some commerce existed, the majority of the world’s population existed by struggling to extract the means of survival from nature.   Commerce and trade had existed for centuries, and industrialism had begun a few centuries earlier, but the majority of things that most people consumed were fashioned from raw materials in their own households.  To have something required the knowledge of making it.

Over many years, this changed, and in the present day few people make things for their own consumption, but instead make things to trade with others to obtain the items they need to consume, and the method of survival has far less to do with the interaction between man and things (though this is ultimately necessary for consumer goods to be fashioned) and more to do with the interaction between man and his fellow men.  The number of people whose work requires physical contact with the product has dwindled, and they are far surpassed by the number of people whose primary work requires contact with other people.

Previous studies of human behavior had focused on observable physical actions (praxeology) without considering the internal motivations – or at best, these motivations were speculated upon based on the premise that they were related strictly to the functional consequences of the action (teleology).   That is: a person takes action because they desire to achieve the consequences of that action, therefore the sum total of their motivations would be predicated on those that would lead to an effective and efficient outcome.

In all, this was a good start, but woefully insufficient to describe human behavior – which is at its core emotional and irrational, and reasoning is later applied to justify or explain it.   The cognitive school of psychology, which is presently in its youth, if not infancy, makes a more serious effort to understand motivation on the emotional and precognitive effort.

The difficulty of analysis is compounded by the economic progress of society: in the present day, the majority of effort and money spent is no longer in pursuit of the basic survival needs of mankind.  Food, shelter, and clothing no longer require the majority of individual or societal resources, and as a consequence psychological needs that are based on things other than functional necessity motivate the majority of human behavior.

Things have only been thus for a few decades in developed countries, though by the mid-twentieth or early twenty-first century, mankind may have reached yet another tipping point at which survival requires so little effort that it may be taken for granted, and that non-functional needs that are entirely psychological are the primary focus, and delivering upon them the primary motivational force for human effort.