Concept · Cognitive Bias: Economic and consumer biases
Money illusion
Origin: Fisher, 1928; Shafir, Diamond & Tversky, 1997
Biological Parallel
Plants respond to relative light levels, not absolute photon counts—a leaf in 10% shade adjusts differently than one in 90% shade, even at identical absolute light intensity. The ratio, not the raw number, drives gene expression. Money illusion works identically: our brains evolved to track relative resource changes (twice as many berries) in contexts where absolute measures were meaningless. Inflation breaks this system by changing the measuring stick while we track the count.