Money illusion
The tendency to think about money in terms of the number on it while forgetting what it can actually buy. We overlook inflation and feel richer when we get more dollars, even if prices have risen faster.
In everyday life
A worker is pleased with a 2% raise in a year when prices rose 4%, though they can now afford less than before.
You're delighted to sell your house for twice what you paid thirty years ago, without considering how much everything else has gone up in price since then.
Why your mind does this
Our senses and judgment work by comparison. Noticing differences from a starting point, or from what came just before, is faster and cheaper than measuring things in absolute terms, and changes are often what signal danger or opportunity.
Its family, in 30 seconds: Change
How to spot it
Ask yourself what this amount of money will actually buy compared to what the old amount bought.
How to counter it
Adjust past and future sums for inflation, for example with an online inflation calculator, before comparing them.