Human behaviour towards money can’t solely be explained by its utility, it has a more addictive quality – like a drug.
It’s no surprise that people want money – we’ve all got bills to pay. It’s also no surprise that money is useful – it would be irritating to pay the electricity bill in corn, goats or some other non-monetary quid pro quo. Originally economists argued that the fact that money is so useful explains why we’re interested in it. But when you think about it, the fact that money is so useful doesn’t fully explain people’s behaviour.
Think about how obsessed people can become with money, beyond its instrumental use, beyond rationality, beyond any easy explanation. Why does a person who is already rolling in money want more? Indeed, why do people whose lives are already comfortable make sacrifices in other areas of their lives – family, friendships and their own sanity – just to get more cash? Especially when, objectively, they appear to be dollars that they don’t need.
Professors Stephen Lea and Paul Webley from the University of Exeter argue that people’s actual behaviour towards money can’t be explained solely by the fact that it is useful – what they refer to as ‘tool theory’ (Lea & Webley, 2006). There seems to be something more going on. Money provokes people into all sorts of bizarre behaviour that can’t easily be explained in terms of its function purely as a tool. Here are five examples Lea and Webley provide:
Money literally looms large in our minds – we seem to imbue it with a special status. Bruner and Goodman (1947) found that children actually perceive money to be physically larger than other objects that are actually the same size. Furnham (1983) found that at a time of high inflation, people consistently thought that old pound notes were physically bigger than the new ones. They were, of course, exactly the same size but people’s knowledge that the currency used to be worth more had become physical in their minds.
Phased by face value
The real, useful value of money changes all the time, e.g. one hundred years ago one pound or one dollar bought a lot more than it does now. Despite this people respond to the face value of money irrespective of its real worth. The introduction in recent years of the Euro across Europe has shown the power of this illusion. Many Europeans have suddenly been faced with a new currency whose face-value is quite different to their old currency. Studies have shown that people are likely to overestimate the real value of money that has a higher face value, and underestimate the real value of money that has a lower face value (e.g. Gamble et al., 2002).
People like money’s form
People are attached to the actual form that money takes and will often resist when innovations are introduced. British people have strongly resisted the introduction of the Euro and Americans continue to reject the introduction of a dollar coin to replace the dollar bill.
Being emotional about cash
Not only are we particular about money’s form, we also have an emotional relationship with it. Psychologists have measured our attitudes towards cash in many different ways, but most find there is a considerable emotional component. When people describe their attitudes to money, it’s more than just its utility that’s important – people actually either love it or hate it.
When cash is not acceptable
The special kind of relationship people have with money is underlined by the times when it can’t be used. Money is often not acceptable as a gift and almost never in sexual relationships; talk of money is also frowned on in high art, religion and education. Similarly there is a taboo about money buying political office (although it clearly does buy political office indirectly).
Money as tool and drug
What all these examples show is that people’s behaviour with and attitudes towards money reach, in many circumstances, beyond its actual utility. People’s thoughts and behaviour towards money can’t easily be explained by it being simply an instrument, so how can we understand it?
Professors Lea and Webley argue that money is not just a tool for us, it also acts like a drug on the mind. Drugs act on the central nervous system to create mental states that do not meet some kind of function in the world in the same way that sex or food does. For example, the feeling of hunger drives us to find food, and we need food to survive, so hunger has an evolutionary function.
Part of the attraction of money, however, like drugs, is that it changes how we feel, but this change has no biological or evolutionary significance. Part of the benefit people derive from acquiring money – e.g. making us feel good – does not lead to some actual benefit in the world, it is just chasing money for the sake of having money.
But if money is like an addictive drug, then where did we acquire this addiction, when did we pick up the taste for money? Lea and Webley suggest two evolutionary roots:
- Trading thrills: As a social species helping each other out has a long evolutionary history. Humans have learnt to exchange items or services for the benefit of both parties. It’s plausible that those who traded more successfully were more likely to survive while those who stuck with what they had tended to die out. Trade gives us a buzz, and money, as the most potent catalyst for exchange, gives us vicarious pleasure.
- Money as a way of keeping score: Humans love to play. Compared to other animals, humans take a long time to grow up, and while growing up, and still afterwards, we have a strong instinct for play. Perhaps our propensity for play naturally provides part of the scaffolding on which we have built our addiction to money. Money turns out to be one of the most addictive games we ever invented.
Can’t get enough of that money
Money is more than just a useful tool, as some economists have argued; while money is certainly useful, human behaviour towards it can’t be explained just by its utility. The drug metaphor helps demonstrate how the motivation for money often extends past its actual utility. This ties in with many sociological analyses that emphasise money’s social meaning and symbolic nature over and above its simple utilitarian applications.
Thinking of money as a drug highlights the biological basis of money. An evolutionary account underlines this biological perspective by suggesting that money addiction might be built on our drive to trade and play.
What Lea and Webley are implicitly arguing against is a purely cultural understanding of humans’ relationship with money. Their view is that culture on its own is not powerful enough to explain the human motivation for money. Money, they argue, whether for good or evil, is part of human nature.
Bruner, J. S. & Goodman, C. C. (1947) Value and need as organising factors in perception. Journal of Abnormal and Social Psychology, 42, 33-44.
Furnham, A. (1983) Inflation and the estimated sizes of notes. Journal of Economic Psychology, 4, 349-52.
Gamble, A., Garling, T., Charlton, J. & Ranyard, R. (2002). Euro-illusion: Psychological insights into price evaluations with a unitary currency. European Psychologist, 7, 302-311.
Lea, S. E. G., & Webley, P. (2006). Money as tool, money as drug: The biological psychology of a strong incentive. Behavioral and Brain Sciences, 29(02), 161-209.
The Psychology of Money
→ This post is part of a series on the the psychology of money:
- Avoid The Relativity Trap – How Thinking Globally Can Save You Money
- Social Versus Financial Thinking – When Money Makes People Lazy and Selfish
- FREE! But at What Price?
- 6 Quirks of Ownership: How Possessions Bend Our Perceptions
- The 3 Reasons Money Brings Satisfaction But Not Happiness
- Do Big Money Bonuses Really Increase Job Performance?
- Money and Self-Control: The Battle Between Thoughts and Emotions
- Why Money is Part of Human Nature: Money as Both Tool and Drug
- Why We Buy: How to Avoid 10 Costly Cognitive Biases
- 8 Psychological Keys to Spending Wisely
- How Does The Cleanliness of Money Affect Our Spending?