The Great Recession of Our Virtual Lives

The debt ceiling debate in Washington has been a scary reminder of our financial dire straits. It is also a good opportunity to discuss the possible contribution of our virtual lifestyle to our economic woes.

We used to want to keep up with the Joneses, but in the past decade we've been trying to keep up with our own online alter egos. The Internet and related technologies have turned money into an even less tangible and further removed concept than the plastic of credit cards, and that is having real repercussions on our personal and national financial health. Is it possible that the Great Recession might also have something to do with our coming of age as virtual creatures? Online, we take on new character traits that add up to a full-fledged "e-personality" - a disinhibited way of behaving and transacting that can be very different from how we have always operated. E-personality traits found in our online alter egos include grandiosity, or the sense that sky is the limit when it comes to what we can accomplish; narcissism, or how we tend to think of ourselves as the center of the World Wide Web; and impulsivity, or the urge-driven lifestyle many of us are falling into. As a consequence of adopting these traits, we feel more potent, special, and spontaneous. When it comes to online spending, the effects become less near and concrete. Fueled by grandiose, narcissistic, and impulsive notions, it is easier online to feel as special, deserving, and immune to bankruptcy as a Marie Antoinette - and to shop accordingly.

The Internet, which helps us create larger than life alter egos, also gives us the illusion that Amazon is our shortcut to realizing them. In a 2007 study, researchers recruited 126 online shoppers. They determined that 10% met criteria for compulsive online shopping. The researchers then set out to understand what prompted the pathological shoppers' online sprees. Was it desire for a better deal? Was it efficiency and convenience? The results showed that neither of these factors triggered compulsive online buying. Instead, the trigger was the prospect of an identity gain - the possibility of feeling grander than one's old self. Compulsive shoppers shopped online because they thought it got them closer to an ideal image that they were chasing. As a result, the researchers suggest that we make efforts to increase awareness of the psychological and financial pitfalls of impulsive online buying through education and consumer advice and, for some, through psychotherapy.

Psychotherapy for your e-tail therapy? It wasn't supposed to turn out that way. A decade ago, it was thought that the Internet would make buying more rational by doing away with the marketing distractions of traditional stores, facilitating price and product comparisons, and freeing us from time pressure. Instead, we find ourselves in a virtual bazaar where we have out-of-control alter egos to contend with, and where buying transactions are so remote from handing over cash or even credit cards that it no longer feels like spending. And so we spend more.

That is why one has to wonder about the role of our virtual lifestyle in the devastating real estate bubble and ensuing Great Recession. Four of the top-ten online advertisers in 2007 sold mortgage services and countless websites were in the business of encouraging consumers, including those with marginal credit histories, to bid on properties they could not afford. This, too, can be seen as a manifestation of grandiose thinking, one that online life, by making us allergic to gravity and anything that holds us back, may have helped facilitate. After all, owning a virtual home is relatively painless: All you need to build your Second Life dream house is borrow a few Lindens, the Second Life currency. They call it "real" estate for a reason, yet many of us approached first, second, and vacation homes as though they were virtual property, castles we built in the sky. Debt stopped scaring us because money had stopped being real. The recession that followed was/is surely very painful, but only as painful as the buying binge that preceded it was unhinged from reality.

Still, the reasons for our fiscal predicament are not agreed upon by economists, let alone psychiatrists. But the idea that the Internet has contributed by making money virtual and more abstract than ever deserves serious consideration. For the obscene living-beyond-our-means that characterized the most recent bubble, and the two trillion dollars that subsequently evaporated, are experiences in unreality that may have more in common with Linden dollars than with any currency or economic model invented before them.