The notion that people care more about the nominal value of money rather than its real value. According to this idea, workers, for instance, would be impressed if their wages double in a year even if the real value of their money were to drop by more than half during the same period. The concept, credited to British economist John Maynard Keynes, has been heavily criticised for its assumption that people are naïve. The theory of rational expectations, which among other things states that people learn from experience and can reset their earlier beliefs, was a response to the idea of money illusion.
