It easy to say that decisions are best made when we are not acting out of our emotions. Yet emotions play a crucial decision-making role by influencing our minds, however objective we may try to be. At a collective level, emotions play an important role in shaping the destinies of nations, from diplomatic to economic levels, as histories of wars and depressions indicates. Understanding the power of emotions on the economic realm extends from individuals to large businesses and government institutions. In this article, Dr David Frawley with U. Mahesh Prabhu explain the subtle yet dynamic relationship between economics and emotions.

By Dr David Frawley with U Mahesh Prabhu

Role of the Mind in All our Transactions

Everything that we call “manmade” is created by the mind. The human being is essentially a mentally based material being. The mind plays a central role in fashioning the world, including the realms of finances from small business transactions to complex business projects and the global economic system.

When we purchase something, it is either because we need it, or because we want it. Whether it is a need or a want, there is no simple way to differentiate between the two. Whether it is a need or a want is decided by the mind, though the mind always tends to turn its wants into needs. Hence if a person wants to be successful in life, they must first understand the minds of their audience and make sure that their audience is influenced, impressed, and motivated to take to take up whatever they are offering.

When you choose to buy one product over another, it is largely because of the methods employed by the manufacturer to influence your mind into buying it. These well known techniques include advertising, branding, packaging, offers, and salesmanship.

Price does play a key role in purchasing decisions. But people also buy things on mortgages or instalments, paying interest rates that often end up costing more than the base price in the long run. Some people pay much more for an item merely because it is a name brand. That they admire.

Your state mind is the key to all transactions, financial, educational or otherwise. The economy is also shaped by the mind extending from the individual to the entire socio-economic web that is not only national but global in nature today.

All human minds have the same basic potentials. Such is our human nature. What differentiates individual minds are what we call in Sanskrit as Samskaras or karmic conditioning factors. Most people view the word “conditioning” in a bad light, as many a types of negate conditionings exist. But the mind has various types of conditioning that are essential, like our ability to learn languages or take on any new skill. The mind is conditioned by our habitual thoughts and behaviour patterns, by our life-regimen and education, and by our values and motivations.

By identifying the type of conditioning of the mind according to age, gender, association, nationality, occupation, belief, culture, and numerous other factors, we can see how the mind of a person is likely to act, react, behave, and respond relative to specific situations or opportunities.

In this regard, the mind has two key elements in its decision-making process: fear and desire. Everything that the mind does works to ensure that it avoids its worst fears and gains its best pleasure or happiness, the objects of its desires. So, if you can convince someone’s mind that what you offer can yield it pleasure or happiness – the mind will do everything in its power to go after it, sometimes regardless of the cost. Similarly, if your mind is made to believe that something occurring will make its worst fears come true – the mind will do everything in its power to avoid it.

Role of the Mind in Economics

Financial markets are essentially about demand and supply, which are connected to fears and desires. Whenever the demand for a specific item is greater than the supply, the price will be higher. Whenever the demand for a specific commodity is less than the supply, the costs are lower. The total economy is the sum condition of multiple such smaller markets and transactions. When markets are functioning smoothly, there is a balanced demand and supply and generally a good economy. When there is more demand than supply it leads to higher prices or inflation. When the supply is greater than the demand – the prices are lower. Yet whenever the prices go higher or lower beyond a particular point – it results in imbalances that can be disruptive.

For example, if the costs are high, the suppliers of goods and services will make more money for a while. But when people run out of money to buy their products, they will not be able to buy them anymore leading to a lowering of demand. To keep prices in balance, governments and their country’s central bank react through bringing in “fiscal measures” designed to make access to borrowing cash easier or more difficult. When borrowing becomes easier, there is an increase in purchasing power, which in turn reflects in a rise in prices. When borrowing is difficult, there is a reduction in prices owing to a lack of purchase power among consumers.

That increase or decrease in purchasing power is connected to the minds of people. When the cost of essential commodities spirals and becomes too high, there are severe social ramifications, even resulting in revolts and the collapse of governments. In recent history, we have seen governments reacting with media and social-media censorships to suppress such revolts. And, yet we also see that these draconian measures can backfire as well, causing yet more problems.

Few modern economists have a clear understanding of the changing economics today in the high tech-information era in which the role of the mind is yet more powerful. Most economists use complex terms and jargon that a layman cannot understand in order to mystify them. Their economic measures try to fix short term indicators but fail to improve the system overall, causing complex economic problems and financial disparity. This is because current models developed by economists look at short term issues rather than the inherent problems in the system itself.

Whenever an economy falls into chaos, the people suffer, which means chaos and panic in the mind. As Krishna says to Arjuna in Vyasa’s Mahabharata: “Chaos in the mind leads to chaos in the family, chaos in the family leads to chaos in society, chaos in society leads to chaos in the nation and chaos in nation leads to chaos in the world.

Instead of trying to fix outer economic indicators, the economy can be better handled by addressing the minds of people. By making peoples’ minds see a better tomorrow to aim for, you can make them work better today. This is best done by understanding the mind and finding ways to help change our fluctuating emotions. This means overcoming fear and making our desires more realistic.

We often look down on people when they speak of their emotions. Yet we must always remember that the mind takes its decisions based upon emotions. So, whether you are trying to make someone subscribe to your service, buy your product, vote for you, or fall in love with you; you will need to understand the nature and tendencies of their minds. And since the greater economy is a collection of various markets based upon peoples’ needs and wants, the mind plays a crucial role in the shaping it. If you are an investor in a stock market, for example, you can predict future prices by getting the pulse of emotions or “market sentiments.”

In the Arthashastra, the key Vedic text on such issues, there are two keywords that speak to this topic: Artha (Meaningful Wealth as well as a harmonious economy) and Swartha (desires, need, wants, and greed). By understanding the Swartha of people, you can determine the condition of Artha-Vyavastha (Economic Conditions.) And behind the economic conditions you can see the more important issues of the collective mindset, fears, and desires, which creates the mental environment in which these decisions and actions will occur.

In short, the rules of mastering the mind at an individual level are like those for mastering the mind at a collective level. A calm and detached mind always has a greater ability to achieve its goals.

This article first appeared in and it belongs to them.