attitude towards money essay

Greater Good Science Center • Magazine • In Action • In Education

How Money Changes the Way You Think and Feel

The term “affluenza”—a portmanteau of affluence and influenza, defined as a “painful, contagious, socially transmitted condition of overload, debt, anxiety, and waste, resulting from the dogged pursuit of more”—is often dismissed as a silly buzzword created to express our cultural disdain for consumerism. Though often used in jest, the term may contain more truth than many of us would like to think.

Whether affluenza is real or imagined, money really does change everything, as the song goes—and those of high social class do tend to see themselves much differently than others. Wealth (and the pursuit of it) has been linked with immoral behavior—and not just in movies like The Wolf of Wall Street .

Psychologists who study the impact of wealth and inequality on human behavior have found that money can powerfully influence our thoughts and actions in ways that we’re often not aware of, no matter our economic circumstances. Although wealth is certainly subjective, most of the current research measures wealth on scales of income, job status, or socioeconomic circumstances, like educational attainment and intergenerational wealth.

Here are seven things you should know about the psychology of money and wealth.

More money, less empathy?

Several studies have shown that wealth may be at odds with empathy and compassion . Research published in the journal Psychological Science found that people of lower economic status were better at reading others’ facial expressions —an important marker of empathy—than wealthier people.

“A lot of what we see is a baseline orientation for the lower class to be more empathetic and the upper class to be less [so],” study co-author Michael Kraus told Time . “Lower-class environments are much different from upper-class environments. Lower-class individuals have to respond chronically to a number of vulnerabilities and social threats. You really need to depend on others so they will tell you if a social threat or opportunity is coming, and that makes you more perceptive of emotions.”

While a lack of resources fosters greater emotional intelligence, having more resources can cause bad behavior in its own right. UC Berkeley research found that even fake money could make people behave with less regard for others. Researchers observed that when two students played Monopoly, one having been given a great deal more Monopoly money than the other, the wealthier player expressed initial discomfort, but then went on to act aggressively, taking up more space and moving his pieces more loudly, and even taunting the player with less money.

Wealth can cloud moral judgment

It is no surprise in this post-2008 world to learn that wealth may cause a sense of moral entitlement. A UC Berkeley study found that in San Francisco—where the law requires that cars stop at crosswalks for pedestrians to pass—drivers of luxury cars were four times less likely than those in less expensive vehicles to stop and allow pedestrians the right of way. They were also more likely to cut off other drivers.

Another study suggested that merely thinking about money could lead to unethical behavior. Researchers from Harvard and the University of Utah found that study participants were more likely to lie or behave immorally after being exposed to money-related words.

“Even if we are well-intentioned, even if we think we know right from wrong, there may be factors influencing our decisions and behaviors that we’re not aware of,” University of Utah associate management professor Kristin Smith-Crowe, one of the study’s co-authors, told MarketWatch .

Wealth has been linked with addiction

While money itself doesn’t cause addiction or substance abuse, wealth has been linked with a higher susceptibility to addiction problems. A number of studies have found that affluent children are more vulnerable to substance-abuse issues , potentially because of high pressure to achieve and isolation from parents. Studies also found that kids who come from wealthy parents aren’t necessarily exempt from adjustment problems—in fact, research found that on several measures of maladjustment, high school students of high socioeconomic status received higher scores than inner-city students. Researchers found that these children may be more likely to internalize problems, which has been linked with substance abuse.

But it’s not just adolescents: Even in adulthood, the rich outdrink the poor by more than 27 percent.

Money itself can become addictive

The pursuit of wealth itself can also become a compulsive behavior. As psychologist Dr. Tian Dayton explained, a compulsive need to acquire money is often considered part of a class of behaviors known as process addictions, or “behavioral addictions,” which are distinct from substance abuse.

These days, the idea of process addictions is widely accepted. Process addictions are addictions that involve a compulsive and/or an out-of-control relationship with certain behaviors such as gambling, sex, eating, and, yes, even money.…There is a change in brain chemistry with a process addiction that’s similar to the mood-altering effects of alcohol or drugs. With process addictions, engaging in a certain activity—say viewing pornography, compulsive eating, or an obsessive relationship with money—can kickstart the release of brain/body chemicals, like dopamine, that actually produce a “high” that’s similar to the chemical high of a drug. The person who is addicted to some form of behavior has learned, albeit unconsciously, to manipulate his own brain chemistry.

While a process addiction is not a chemical addiction, it does involve compulsive behavior —in this case, an addiction to the good feeling that comes from receiving money or possessions—which can ultimately lead to negative consequences and harm the individual’s well-being. Addiction to spending money—sometimes known as shopaholism—is another, more common type of money-associated process addiction.

Wealthy children may be more troubled

Children growing up in wealthy families may seem to have it all, but having it all may come at a high cost. Wealthier children tend to be more distressed than lower-income kids, and are at high risk for anxiety, depression, substance abuse, eating disorders, cheating, and stealing. Research has also found high instances of binge-drinking and marijuana use among the children of high-income, two-parent, white families.

“In upwardly mobile communities, children are often pressed to excel at multiple academic and extracurricular pursuits to maximize their long-term academic prospects—a phenomenon that may well engender high stress,” writes psychologist Suniya Luthar in “The Culture Of Affluence.” “At an emotional level, similarly, isolation may often derive from the erosion of family time together because of the demands of affluent parents’ career obligations and the children’s many after-school activities.”

We tend to perceive the wealthy as “evil”

On the other side of the spectrum, lower-income individuals are likely to judge and stereotype those who are wealthier than themselves, often judging the wealthy as being “cold.” (Of course, it is also true that the poor struggle with their own set of societal stereotypes.)

Rich people tend to be a source of envy and distrust, so much so that we may even take pleasure in their struggles, according to Scientific American . According to a University of Pennsylvania study entitled “ Is Profit Evil? Associations of Profit with Social Harm ,” most people tend to link perceived profits with perceived social harm. When participants were asked to assess various companies and industries (some real, some hypothetical), both liberals and conservatives ranked institutions perceived to have higher profits with greater evil and wrongdoing across the board, independent of the company or industry’s actions in reality.

Money can’t buy happiness (or love)

We tend to seek money and power in our pursuit of success (and who doesn’t want to be successful, after all?), but it may be getting in the way of the things that really matter: happiness and love.

There is no direct correlation between income and happiness. After a certain level of income that can take care of basic needs and relieve strain ( some say $50,000 a year , some say $75,000 ), wealth makes hardly any difference to overall well-being and happiness and, if anything, only harms well-being: Extremely affluent people actually suffer from higher rates of depression . Some data has suggested money itself doesn’t lead to dissatisfaction—instead, it’s the ceaseless striving for wealth and material possessions that may lead to unhappiness. Materialistic values have even been linked with lower relationship satisfaction .

But here’s something to be happy about: More Americans are beginning to look beyond money and status when it comes to defining success in life. According to a 2013 LifeTwist study , only around one-quarter of Americans still believe that wealth determines success.

This article originally appeared in the Huffington Post .

About the Author

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Why Are We So Emotional about Money?

• Rakshitha Arni Ravishankar

Our relationship with money is just as personal as any other big relationship in our lives.

If money brings up a lot of emotions for you, you’re not alone. Financial expert Ramit Sethi explains our relationship with money is just as personal and valuable as any other relationship in our life. Here are some ways to build a healthier relationship with money.

• First, know that it’s okay to feel emotional about money. Use them to understand your values, your fears, your needs, and your wants.
• Then, start educating yourself about money. Understand what terms like credit, loan, compound interest, etc. mean. Often, the fear of money comes from a lack of knowledge or awareness about it.
• Finally, be inspired by money. Instead of focusing on what you don’t have, think about what money can buy. Don’t just focus on the materialistic aspects but also the experiences it affords you.

How do you feel about money?

• RR Rakshitha Arni Ravishankar is an associate editor at Ascend.

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Catch Them Young: Impact of Financial Socialization, Financial Literacy and Attitude Toward Money on Financial Well-being of Young Adults

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260 Money Topics to Write About & Essay Examples

Looking for a topic about money? Money won’t leave anyone indifferent! There are lots of money essay topics for students to explore.

🏆 Best Money Essay Examples & Ideas

👍 good money essay topics, 💡 easy money topics to write about, 📃 interesting topics about money, 📑 good research topics about money, 📌 most interesting money topics to write about, ❓ research questions about money.

You might want to focus on the issue of money management or elaborate on why money is so important nowadays. Other exciting topics for a money essay are the relation between money and love, the role of money in education, etc. Below you’ll find a list of money topics to write about! These ideas can also be used for discussions and presentations. Money essay examples are a nice bonus to inspire you even more!

• Can Money Buy You Happiness? First of all, given that happiness is related to the satisfaction of personal needs, there is also a need to consider the essential need of human life such as housing, medicine, and food.
• Connection Between Money and Happiness Critical analysis of money-happiness relationship shows that socioeconomic factors determine the happiness of an individual; therefore, it is quite unsatisfactory to attribute money as the only factor and determinant of happiness.
• Money as a Form of Motivation in the Work Place This then shows that money can and is used as a motivational factor in the work place so that employees can strive to give their best and their all at the end of the day.
• I Don’t Believe Money Can Buy Happiness This shows that as much as money is essential in acquisition and satisfaction of our needs, it does not guarantee our happiness by its own and other aspects of life have to be incorporated to […]
• Money, Happiness and Relationship Between Them The research conducted in the different countries during which people were asked how satisfied they were with their lives clearly indicated the existence of a non-linear relationship between the amount of money and the size […]
• Anti-Money Laundering and Hawala System in Dubai To prevent money launders and agents, most countries enacted the anti-money laundering acts with the goal of tracking and prosecuting offenders.
• Money and Banking: General Information The essay gives the definition of money and gives a brief description of the functions of money. As a store of value, money can be saved reliably and then retrieved in the future.
• Money: Good or Evil? Comparing & Contrasting While there are those amongst us who subscribe to the school of though that “money is the source of all evil”, others are of the opinion that money can buy you anything, literary.
• Time Value of Money: Importance of Calculating Due to fluctuations in economies, all organizations need to take into consideration concepts of the time value of money in any investment venture.
• The Global Media Is All About Money and Profit Making It is noteworthy that the advertisement are presented through the media, which confirms the assertion that global media is all about money and profit making. The media firms control the information passed to the public […]
• Does Money Buy Happiness? Billions of people in all parts of the world sacrifice their ambitions and subconscious tensions on the altar of profitability and higher incomes. Yet, the opportunity costs of pursuing more money can be extremely high.
• Discussion: Can Money Buy Happiness? Reason Two: Second, people are psychologically predisposed to wanting more than they have, so the richer people are, the less feasible it is to satisfy their demands.
• Prices Rise When the Government Prints too Much Money Makinen notes that an increase in the supply of money in an economy relative to the output in the economy could lead to inflationary pressure on prices of goods and services in the economy.
• Money and Modern Life The rich and the powerful are at the top while the poor and helpless are at the bottom, the rest lie in-between.
• Two Attitudes Towards Money The over-dependence on money to satisfy one’s emotional needs is a negative perspective of money. The positive attitude of money is rarely practiced by people.
• Why Money Is Important: Benefits & Downsides The notion originated from the Bible because the person who made Jesus suffer on the cross was enticed by the love of money to forsake Jesus.
• Giving Money to the Homeless: Is It Important? The question of whether a person should give money to a homeless person or not is a complicated one and cannot have the right answer.
• Anti-Money Laundering in Al Ansari Exchange Case Study Details Company name: Al Ansari Exchange Headquarters: Dubai, United Arab Emirates Sector: Financial Services Number of employees: 2500 Annual gross revenue: UAED 440.
• Are Workers Motivated Mainly by Money? Related to the concept of work and why people work is the original concept developed by Karl Marx in the so-called conflict theory.
• Money and Its Value Throughout the World History What is important is the value that people place on whatever unit they refer to as amoney.’ Money acts as a medium of exchange and an element of measurement of the value of goods and […]
• Efforts to Raise Money for Charity However, the point is that charity is supposed to be for a simple act of giving and not expecting any returns from it.
• Money and Happiness in Poor and Wealthy Societies Comprehending the motivations for pursuing money and happiness is the key to understanding this correlation. The Easterlin paradox summed this view by showing that income had a direct correlation with happiness.
• Time Value of Money Compounding was done on the amount that I had lent out using the market rate over the duration of time the person held my money.
• Success and Money Correlation The development of the information technologies and the ongoing progress led to the reconsideration of the values and beliefs. It is significant to understand that there is no right or wrong answer for the question […]
• “College Is a Waste of Time and Money” by Bird Bird’s use of logical fallacies, like if students do not want to go to college, they should not do it until the reasons of their unwillingness are identified, proves that it is wrong to believe […]
• Money, Success, and Relation Between Them In particular, the modern generation attaches so much importance to money in the sense that success and money are presumed to be one and the same thing.
• The Relationship Between Money Supply and Inflation It is evidenced that changing the money supply through the central banks leads to a control of the inflationary situations in the same economy.
• Money Laundering: Most Effective Combat Strategies The practice of money laundering affects the economy and security of a country. Countries have directed their efforts to curb money laundering to control the downwards projections of their countries’ economies.
• Strategies to Save and Protect Money Thus, the main points of expenditure will be clearly marked, which will help to exclude the purchase of unnecessary goods and services.
• Money, Happiness and Satisfaction With Life Nonetheless, the previously mentioned examples should be used to remind us that money alone is not a guarantee of happiness, satisfaction with life, and good health.
• The Airtel Money Service: Indian and African Paths When comparing the Indian and African paths in introducing the service, the first difference that arises is the main user of the service as in the case of India, it was the lower middle class.
• Money: Evolution, Functions, and Characteristics It acts as medium of exchange where it is accepted by both buyers and sellers; the buyer gives money to the seller in exchange of commodities.
• Should America Keep Paper Money It is possible to begin the discussion of the need for keeping paper currency from referring to the rights of any people.
• Where Does the Money Go? by Bittle & Johnson Therefore, the authors explain key issues of the national debt in a relatively simple language and provide their opinion on how the country got into that situation and what could be done about it. In […]
• The Use of Money in Business Practices Money is seen as the cause of problems and especially in the minds of emerging market respondents. Through this they can pick up groceries for the old in their neighborhood and make money from this.
• The Ascent of Money: A Financial History of the World The succinctness of this book lies in the critical analysis and emphasis of the financial history of money in spite of the fact it has impeded some important functions of the global economy.
• Why People Should Donate Time, Money, Energy to a Particular Organization, Charity, or Cause Its vision is to have a world that is free from Alzheimer’s disease.”The Alzheimer’s Association is the leading, global voluntary health organization in Alzheimer’s care and support, and the largest private, nonprofit funder of Alzheimer’s […]
• Money or Family Values First? Which Way to Go As such, family values becomes the epicenter of shaping individual behavior and actions towards the attainment of a certain good, while money assumes the position of facilitating the attainment of a certain good such as […]
• Money Management in the Organization There is a much debate on the issue and several people an financial experts do analyze the historical perspectives of the Active vs Passive money management.
• Two Attitudes Toward Money Two attitudes toward money involve negative perception of money as universal evil and positive perception of money as source of good life and prosperity.
• Relation Between Money and Football In the English league, clubs have been spending millions to sign up a player in the hope that the player will turn the fortunes of the company for the good.
• “From Empire to Chimerica” in “The Ascent of Money” In the chapter “From Empire to Chimerica,” Niall Ferguson traces back the history of the Western financial rise and suggests that nowadays it is being challenged by the developing Eastern world. The hegemonic position of […]
• Paper Money and Its Role Throughout History The adoption of the paper money was considered to be beneficial for both the wealth of the country and the individual businessmen.
• Electronic Money: Challenges and Solutions First of all, it should be pointed out that money is any type of phenomenon which is conventionally accepted as a universal carrier of value, or “any generally accepted means of payment which is allowed […]
• Exploring the Relationship Between Education and Money A person cannot be able to change his/her ascribed status in the society, but only through education a person is able to change his/her Socio-economic status and to some extent that of his/her family once […]
• Drugs: The Love of Money Is the Root of All Evils The political issues concerning the use of drugs consist of, but not limited to, the substances that are defined as drugs, the means of supplying and controlling their use, and how the society relates with […]
• Money Saving Methods for College Students A budget is one of the methods that a college student can use to save money. In the budget, one should indicate how much to save and the means of saving the money.
• Mobile Money Transfer Service The Vodafone team managed to keep mobile banking service simple to its users. Soon mobile banking became a form of viral marketing and drove the growth of the company and its services.
• Opinion on the Importance of Money In the absence of money, individuals and organizations would be forced to conduct transactions through barter trade which is a relatively challenging system due to existence of double coincidence of wants.
• Money Laundering Scene in Police Drama “Ozark” In one of the first season’s episodes, Marty, the main character, illustrates the process of money laundering crime. In the scene, one can see that Marty is fully sane and is committing a crime voluntarily.
• Money From the Christian Perspective Work in Christian missions is a business and since it affects the relationship between the missionary and the people he is trying to reach, missionary funding is essential.
• Business Case Scenario: Missing Money in a Company A possible scenario explaining how money is missing is through the payroll department my first argument seeks to prove the payroll department as the loophole of the company’s misfortunes.
• Sports Stadiums’ Funding by Public Money The issue is controversial from an ethical point of view since not all citizens whose taxes can be spent on the construction of the stadium are interested in or fond of sports.
• Money Laundering: The Kazakhgate Case He was accused of breaking the Foreign Corrupt Practices Act of 1974 and money laundering by the U.S.attorney’s office for the Southern District of New York.
• The Ways Terrorists Raise and Move Money Moreover, the government has put into action the freezing orders and blocking of united states individuals who are presumed to have a hand in terrorist activities.
• “Money as a Weapon” System and Fiscal Triad Furthermore, the fiscal triad encompasses the procurement of products and services and the disbursement and accounting of public funding. Fiscal legislation and contracts are two key components of the “money as a weapon” system.
• The Fiscal Triad and Money as a Weapon System The reliance on the unit commanders sparked the development of the complementary strategy, “Money as a Weapon System,” which became a focal point of the Iraq and Afghanistan campaigns.
• Saving Money Using Electric or Gas Vehicles The central hypothesis of the study is that the electric car will save more money than gas ones. The main expected outcome that the study is counting on is a confirmation of the presented hypothesis […]
• Traditional vs. Modern Forms of Money The most significant argument for the continuing existence of traditional forms of money is the impossibility of converting all financial resources into a digital form.
• Money Laundering Through Cryptocurrencies This study will try to critique the approaches used by countries to address the aspect of money laundering activities and the risks posed by digital currencies.
• Time Value of Money: What You Should Know The time value of money is a paramount financial concept, according to which a certain amount is now worth more than the same amount in the future.
• The Lebanese-Canadian Bank’s Money Laundering The bank was later banned from using the dollar by the American treasury; this resulted in the collapse and eventual sale of the bank.L.C.B.had to pay a settlement fine of one hundred and two million […]
• Play Money Paper: A Report Betas of the Companies in the Portfolio It is noteworthy that in the given portfolio, the beta indices of the companies involved vary considerably.
• Integration of Business Ethics in Preventing Money Laundering Schemes The shipping information within the document seems inaccurate with the intention to launder money from the buyer. The contribution of ocean carrier in the transaction process is doubtful to a given extent.
• Trade-Based Money Laundering The purpose of this paper is to research the subject of trade-based money laundering, its impact on global scene and export controls, identify types of trade finance techniques used to launder illegal money, and provide […]
• Impact of Natural Disasters on Money Markets and Investment Infusion of funds from the central bank during natural disasters results in higher process of exports as a direct result of an increase in the value of the local currency.
• The Perception of Money, Wealth, and Power: Early Renaissance vs. Nowadays In the Renaissance period, power was a questionable pursuit and could be viewed as less stable due to more frequent upheavals.
• Financial Institutions and Money Money is a store of value because it can be saved now and used to purchase se goods and services in the future.
• Researching of the Time Value of Money After receiving the loan, one of the monetary policies that would help PIIGS to stabilize is the deflation of their currency, in this case, the Euro.
• Anti-Money Laundering: Financial Action Task Force Meanwhile, given the limited access for physical assessment of state jurisdictions, it is likely that current provisions of FATF are yet to be revised in spite of pandemic travel and assessment restrictions.
• Anti-Money Laundering in the UK Jurisdiction The regime adopted in the UK is based on the provisions of “the Terrorism Act of 2000, the Proceeds of Crime Act of 2002, as well as the Money Laundering, Terrorist Financing, and Transfer of […]
• Trade-Based Money Laundering and Its Attractiveness The proliferation of the trade-based money laundering is directly related to the growing complexity of international trade systems, where new risks and vulnerabilities emerge and are seen as favorable among terrorist organizations seeking for the […]
• Money Laundering and Sanctions Regulatory Frameworks Under the provisions of OFAC, the company has violated the cybersecurity rules that might indirectly bring a significant threat to the national security or the stability of the United States economy by engaging in online […]
• Type Borrowing Money: Margin Lending In the defense of the storm financial planning firm, BOQ submitted to the authorities that in view of banking regulatory policies, storm had not contravened any of the policies and this is the reason why […]
• Lessons on Financial Planning Using Money Tree Software Financial planning remains a fundamental function among the investors in coming up with a method of using the finances presently and in the future.
• The Supply of Money in the Capitalist Economy In the capitalist economy that the world is currently based on, the supply of money plays a significant role in not only affecting salaries and prices but also the growth of the economy.
• Time Value of Money Defined and Calculations Simply put, the same value of money today is worth the same value in future. The time value of money can therefore be defined as the calculated value of the money taking into consideration various […]
• Anti Money Laundering and Financial Crime There are a number of requirements by the government on the AML procedures to be developed and adopted by the firms in the financial service in industry in an attempt to fight the illegal practice.
• Money Tree Software: Financial Planning This return is important because: It represents the reward the business stakeholders and owner of the business get in staking their money on the business currently and in the future It rewards the business creditors […]
• Money Management: Investment on Exchange-Traded Funds The essay will discuss the possibility of investing in a number of selected ETFs in connection to an investment objective of an individual.
• What Is Money Laundering and Is It Possible to Fight It Certainly and more often money involved in laundering is obtained from illegal activities and the main objective of laundering is to ‘clean’ the dirty money and give it a legitimate appearance in terms of source.
• Time Value of Money: Choosing Bank for Deposit The value of the money is determined by the rate of return that the bank will offer. The future value of the two banks is $20,000 and $22,000 for bank A and bank B respectively.
• How Money Market Mutual Funds Contributed to the 2008 Financial Crisis While how the prices of shares fell below the set $1 per share was a complex process, it became one of the greatest systemic risks posed by the MMMF to the investors and the economy […]
• Time Value of Money From an Islamic Perspective Islamic scholars say that the time value of money and the interest rates imposed on money lent are the reasons why the poor keep on getting poor and the rich richer.
• Rational Decision Making: Money on Your Mind The mind is responsible for making financial decision and it is triggered by the messages we receive on the day to day activities. Lennick and Jordan explain that, we have two systems in the brain; […]
• A Usability Test Conducted on GE Money.com.au It is common knowledge that the easier it is to access services and products on a given website the more likely users will be encouraged to come back.
• “Most Important Thing Is Money Ltd”: Vaccination Development Thus, necessary powers have been vested with the Secretary of State for Health in England, through the recommendations of the Joint Committee on Vaccinations and Immunisation to enforce such preventive steps, through necessary programs that […]
• Money Investments in the Companies and Bonds The stock volume is on the low level now, about 30, but it is connected with the crisis in the world and the additional investment may support the company and increase it. In general the […]
• How the Virus Transformed Money Spending in the US In the article featured in the New York Times, Leatherby and Geller state that the rate at which people spend their money has rapidly decreased due to the emergence of the virus in the United […]
• The Role of Money and Class Division in Society The image of modern American society tries in vain to convey the prevalence of personality over social division. Americans’ perception of financial status has been shaped for years by creating the notion of the “American […]
• Money and American Classes in 1870-1920 Wherein, the time of the stock market emergence was the time of the ongoing “carnival,” where the mystical power of money transferred to miraculous products and medicines and compelling advertisements.
• The Ascent of Money – Safe as Houses Looking from a broad historical perspective, Niall Ferguson devotes the chapter “Save as Houses” to the observation of the real estate concept transformation, describes the place of the real estate market in the economic systems […]
• The Ascent of Money – Blowing Bubbles The price for a share tells how much people rely on the cost of the company in the future. The life of a stock market represents the reflection of human moods on the price of […]
• Canada’s Role in the History of Money: The Relationship Between Ownership and Control Individuals with the predominant shares gain the directorship of the wealth production channels and as such gain control of the diversified owners.
• Why Non-Monetary Incentives Are More Significant Than Money It is important to recognize that both monetary and non-monetary incentives, otherwise known as total rewards, are offered to employees in diverse ways for purposes of attracting and motivating them to the ideals of the […]
• Money Role in Macro Economy The dollar is till now the most accepted currency in the world and this dollar fluctuation that has been caused by the worst recession in American history since the time of the Great Depression is […]
• Change in the Value of Money According to Keynes To explain the effect of inflation on investors, Keynes delves into the history of inflation through the nineteenth century and tries to explain the complacency of investors at the beginning of the First World War […]
• Organizational Communication & the “Money” Aspect While the use of this information is critical for both ensuring survival of the organization and being a frontrunner in its strategies for the future, there are large boulders in use of this information effectively, […]
• Money Makes You Happy: Philosophical Reasoning It is possible to give the right to the ones who think that money can buy happiness. This conclusion is not accepted by psychologists who think that wealth brings the happiness only in the moment […]
• Spare Change: Giving Money to the “Undeserving Poor” To address the central theme of the article, one need to delve deeper into the psyche of giving alms and money to the poor people we meet on the street.
• Money Laundering and Terrorist Finance However, the balance money after the sham gambling is transferred to another ordinary bank account, thereby creating a legal status for the laundered money as if it has come from gambling and will be employed […]
• City Planning. Too Much Money: Why Savings Are Bad The scenario is that the expected growth in economies where the rate of savings is high has not shown a corresponding increase in growth rate also.
• Debates in Endogenous Money: Basil Moore The value of the currency was determined by the value of the precious metal used to mint the currency. From the time Federal Reserve took control of money and credit, economic consistency is attained by […]
• Money and Banking. Financial Markets The essay will examine the essence and the importance of the above-mentioned financial phenomena and see how their interrelation, especially in the negative context, can influence the state of things in society.
• Money and Justice: High-Profile Cases It is estimated that thousands of persons bracketed in the ‘poor’ sector of society go to jail annually in the United States without having spoken to a lawyer.
• Accounting for Public Money After Railway Privatization There were very many problems prior to the railway privatization in 1990.one of the problems that led to the privatization of the railway line in the UK was the misappropriation of taxpayers’ money.
• Time Value of Money and Its Financial Applications The time value of money refers to the idea that money available at the present time is worth more than the same amount in the future, due to its potential earning capacity.
• Money Laundering in the USA and Australia The International Money Fund has established that the aggregate size of money laundering in the World is approximately four percent of the world’s gross domestic product.
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• The Concept of Money Laundering The first issue I have learned is that the main problem lies in the presence of Big Data that includes trillions of transactions of various financial organizations and systems.
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Philosophy of Money and Finance

Finance and philosophy may seem to be worlds apart. But they share at least one common ancestor: Thales of Miletus. Thales is typically regarded as the first philosopher, but he was also a financial innovator. He appears to have been what we would now call an option trader. He predicted that next year’s olive harvest would be good, and therefore paid a small amount of money to the owners of olive presses for the right to the next year’s use. When the harvest turned out to be as good as predicted, Thales earned a sizable amount of money by renting out the presses (Aristotle, Politics , 1259a).

Obviously, a lot has changed since Thales’ times, both in finance and in our ethical and political attitudes towards finance. Coins have largely been replaced by either paper or electronic money, and we have built a large infrastructure to facilitate transactions of money and other financial assets—with elements including commercial banks, central banks, insurance companies, stock exchanges, and investment funds. This institutional multiplicity is due to concerted efforts of both private and public agents, as well as innovations in financial economics and in the financial industry (Shiller 2012).

Our ethical and political sensitivities have also changed in several respects. It seems fair to say that most traditional ethicists held a very negative attitude towards financial activities. Think, for example, of Jesus’ cleansing of the temple from moneylenders, and the widespread condemnation of money as “the root of all evil”. Attitudes in this regard seem to have softened over time. However, the moral debate continues to recur, especially in connection with large scandals and crises within finance, the largest such crisis in recent memory of course being the global financial crisis of 2008.

This article describes what philosophical analysis can say about money and finance. It is divided into five parts that respectively concern (1) what money and finance really are (metaphysics), (2) how knowledge about financial matters is or should be formed (epistemology), (3) the merits and challenges of financial economics (philosophy of science), (4) the many ethical issues related to money and finance (ethics), and (5) the relationship between finance and politics (political philosophy).

1.1 What is Money?

1.2 what is finance, 2. epistemology, 3. philosophy of science, 4.1.1 the love of money, 4.1.2 usury and interest, 4.1.3 speculation and gambling, 4.2.1 deception and fraud, 4.2.2 avoiding conflicts of interest, 4.2.3 insider trading, 4.3.1 systemic risk and financial crises, 4.3.2 microfinance, 4.3.3 socially responsible investment, 5.1 financialization and democracy, 5.2 finance, money, and domestic justice, 5.3 finance and global justice, other internet resources, related entries, 1. metaphysics.

Money is so ever-present in modern life that we tend to take its existence and nature for granted. But do we know what money actually is? Two competing theories present fundamentally different ontologies of money.

The commodity theory of money: A classic theory, which goes back all the way to Aristotle ( Politics , 1255b–1256b), holds that money is a kind of commodity that fulfills three functions: it serves as (i) a medium of exchange, (ii) a unit of account, and (iii) a store of value. Imagine a society that lacks money, and in which people have to barter goods with each other. Barter only works when there is a double coincidence of wants ; that is, when A wants what B has and B wants what A has. But since such coincidences are likely to be uncommon, a barter economy seems both cumbersome and inefficient (Smith 1776, Menger 1892). At some point, people will realize that they can trade more easily if they use some intermediate good—money. This intermediate good should ideally be easy to handle, store and transport (function i). It should be easy to measure and divide to facilitate calculations (function ii). And it should be difficult to destroy so that it lasts over time (function iii).

Monetary history may be viewed as a process of improvement with regard to these functions of money (Ferguson 2008, Weatherford 1997). For example, some early societies used certain basic necessities as money, such as cattle or grain. Other societies settled on commodities that were easier to handle and to tally but with more indirect value, such as clamshells and precious metals. The archetypical form of money throughout history are gold or silver coins—therefore the commodity theory is sometimes called metallism (Knapp 1924, Schumpeter 1954). Coinage is an improvement on bullion in that both quantity and purity are guaranteed by some third party, typically the government. Finally, paper money can be viewed as a simplification of the trade in coins. For example, a bank note issued by the Bank of England in the 1700s was a promise to pay the bearer a certain pound weight of sterling silver (hence the origin of the name of the British currency as “pounds sterling”).

The commodity theory of money was defended by many classical economists and can still be found in most economics textbooks (Mankiw 2009, Parkin 2011). This latter fact is curious since it has provoked serious and sustained critique. An obvious flaw is that it has difficulties in explaining inflation, the decreasing value of money over time (Innes 1913, Keynes 1936). It has also been challenged on the grounds that it is historically inaccurate. For example, recent anthropological studies question the idea that early societies went from a barter economy to money; instead money seems to have arisen to keep track of pre-existing credit relationships (Graeber 2011, Martin 2013, Douglas 2016).

The credit theory of money: According to the main rival theory, coins and notes are merely tokens of something more abstract: money is a social construction rather than a physical commodity. The abstract entity in question is a credit relationship; that is, a promise from someone to grant (or repay) a favor (product or service) to the holder of the token (Macleod 1889, Innes 1914, Ingham 2004). In order to function as money, two further features are crucial: that (i) the promise is sufficiently credible, that is, the issuer is “creditworthy”; and (ii) the credit is transferable, that is, also others will accept it as payment for trade.

It is commonly thought that the most creditworthy issuer of money is the state. This thought provides an alternative explanation of the predominance of coins and notes whose value is guaranteed by states. But note that this theory also can explain so-called fiat money, which is money that is underwritten by the state but not redeemable in any commodity like gold or silver. Fiat money has been the dominant kind of money globally since 1971, when the United States terminated the convertibility of dollars to gold. The view that only states can issue money is called chartalism , or the state theory of money (Knapp 1924). However, in order to properly understand the current monetary system, it is important to distinguish between states’ issuing versus underwriting money. Most credit money in modern economies is actually issued by commercial banks through their lending operations, and the role of the state is only to guarantee the convertibility of bank deposits into cash (Pettifor 2014).

Criticisms of the credit theory tend to be normative and focus on the risk of overexpansion of money, that is, that states (and banks) can overuse their “printing presses” which may lead to unsustainable debt levels, excessive inflation, financial instability and economic crises. These are sometimes seen as arguments for a return to the gold standard (Rothbard 1983, Schlichter 2014). However, others argue that the realization that money is socially constructed is the best starting point for developing a more sustainable and equitable monetary regime (Graeber 2010, Pettifor 2014). We will return to this political debate below ( section 5.2 ).

The social ontology of money: But exactly how does the “social construction” of money work? This question invokes the more general philosophical issue of social ontology, with regard to which money is often used as a prime example. In an early philosophical-sociological account, Georg Simmel (1900) describes money as an institution that is a crucial precondition for modernity because it allows putting a value on things and simplifies transactions; he also criticizes the way in which money thereby replaces other forms of valuation (see also section 4.1 ).

In the more recent debate, one can distinguish between two main philosophical camps. An influential account of social ontology holds that money is the sort of social institution whose existence depends on “collective intentionality”: beliefs and attitudes that are shared in a community (Searle 1995, 2010). The process starts with someone’s simple and unilateral declaration that something is money, which is a performative speech act. When other people recognize or accept the declaration it becomes a standing social rule. Thus, money is said to depend on our subjective attitudes but is not located (solely) in our minds (see also Lawson 2016, Brynjarsdóttir 2018, Passinsky 2020, Vooys & Dick 2021).

An alternative account holds that the creation of money need not be intentional or declarative in the above sense. Instead money comes about as a solution to a social problem (the double coincidence of wants) – and it is maintained simply because it is functional or beneficial to us (Guala 2016, Hindriks & Guala 2021). Thus what makes something money is not the official declarations of some authority, but rather that it works (functions) as money in a given society (see also Smit et al. 2011; 2016). (For more discussion see the special issue by Hindriks & Sandberg 2020, as well as the entries on social ontology and social institutions ).

One may view “finance” more generally (that is, the financial sector or system) as an extension of the monetary system. It is typically said that the financial sector has two main functions: (1) to maintain an effective payments system; and (2) to facilitate an efficient use of money. The latter function can be broken down further into two parts. First, to bring together those with excess money (savers, investors) and those without it (borrowers, enterprises), which is typically done through financial intermediation (the inner workings of banks) or financial markets (such as stock or bond markets). Second, to create opportunities for market participants to buy and sell money, which is typically done through the invention of financial products, or “assets”, with features distinguished by different levels of risk, return, and maturation.

The modern financial system can thus be seen as an infrastructure built to facilitate transactions of money and other financial assets, as noted at the outset. It is important to note that it contains both private elements (such as commercial banks, insurance companies, and investment funds) and public elements (such as central banks and regulatory authorities). “Finance” can also refer to the systematic study of this system; most often to the field of financial economics (see section 3 ).

Financial assets: Of interest from an ontological viewpoint is that modern finance consists of several other “asset types” besides money; central examples include credit arrangements (bank accounts, bonds), equity (shares or stocks), derivatives (futures, options, swaps, etc.) and funds (trusts). What are the defining characteristics of financial assets?

The typical distinction here is between financial and “real” assets, such as buildings and machines (Fabozzi 2002), because financial assets are less tangible or concrete. Just like money, they can be viewed as a social construction. Financial assets are often derived from or at least involve underlying “real” assets—as, for example, in the relation between owning a house and investing in a housing company. However, financial transactions are different from ordinary market trades in that the underlying assets seldom change hands, instead one exchanges abstract contracts or promises of future transactions. In this sense, one may view the financial market as the “meta-level” of the economy, since it involves indirect trade or speculation on the success of other parts of the economy.

More distinctly, financial assets are defined as promises of future money payments (Mishkin 2016, Pilbeam 2010). If the credit theory of money is correct, they can be regarded as meta-promises: promises on promises. The level of abstraction can sometimes become enormous: For example, a “synthetic collateralized debt obligation” (or “synthetic CDO”), a form of derivative common before the financial crisis, is a promise from person A (the seller) to person B (the buyer) that some persons C to I (speculators) will pay an amount of money depending on the losses incurred by person J (the holder of an underlying derivative), which typically depend on certain portions (so-called tranches) of the cash flow from persons K to Q (mortgage borrowers) originally promised to persons R to X (mortgage lenders) but then sold to person Y (the originator of the underlying derivative). The function of a synthetic CDO is mainly to spread financial risks more thinly between different speculators.

Intrinsic value: Perhaps the most important characteristic of financial assets is that their price can vary enormously with the attitudes of investors. Put simply, there are two main factors that determine the price of a financial asset: (i) the credibility or strength of the underlying promise (which will depend on the future cash flows generated by the asset); and (ii) its transferability or popularity within the market, that is, how many other investors are interested in buying the asset. In the process known as “price discovery”, investors assess these factors based on the information available to them, and then make bids to buy or sell the asset, which in turn sets its price on the market (Mishkin 2016, Pilbeam 2010).

A philosophically interesting question is whether there is such a thing as an “intrinsic” value of financial assets, as is often assumed in discussions about financial crises. For example, a common definition of an “asset bubble” is that this is a situation that occurs when certain assets trade at a price that strongly exceed their intrinsic value—which is dangerous since the bubble can burst and cause an economic shock (Kindleberger 1978, Minsky 1986, Reinhart & Rogoff 2009). But what is the intrinsic value of an asset? The rational answer seems to be that this depends only on the discounted value of the underlying future cash flow—in other words, on (i) and not (ii) above. However, someone still has to assess these factors to compute a price, and this assessment inevitably includes subjective elements. As just noted, it is assumed that different investors have different valuations of financial assets, which is why they can engage in trades on the market in the first place.

A further complication here is that (i) may actually be influenced by (ii). The fundamentals may be influenced by investors’ perceptions of them, which is a phenomenon known as “reflexivity” (Soros 1987, 2008). For example, a company whose shares are popular among investors will often find it easier to borrow more money and thereby to expand its cash flow, in turn making it even more popular among investors. Conversely, when the company’s profits start to fall it may lose popularity among investors, thereby making its loans more expensive and its profits even lower. This phenomenon amplifies the risks posed by financial bubbles (Keynes 1936).

Given the abstractness and complexity of financial assets and relations, as outlined above, it is easy to see the epistemic challenges they raise. For example, what is a proper basis for forming justified beliefs about matters of money and finance?

A central concept here is that of risk. Since financial assets are essentially promises of future money payments, a main challenge for financial agents is to develop rational expectations or hypotheses about relevant future outcomes. The two main factors in this regard are (1) expected return on the asset, which is typically calculated as the value of all possible outcomes weighted by their probability of occurrence, and (2) financial risk, which is typically calculated as the level of variation in these returns. The concept of financial risk is especially interesting from a philosophical viewpoint since it represents the financial industry’s response to epistemic uncertainty. It is often argued that the financial system is designed exactly to address or minimize financial risks—for example, financial intermediation and markets allow investors to spread their money over several assets with differing risk profiles (Pilbeam 2010, Shiller 2012). However, many authors have been critical of mainstream operationalizations of risk which tend to focus exclusively on historical price volatility and thereby downplay the risk of large-scale financial crises (Lanchester 2010, Thamotheram & Ward 2014).

This point leads us further to questions about the normativity of belief and knowledge. Research on such topics as the ethics of belief and virtue epistemology considers questions about the responsibilities that subjects have in epistemic matters. These include epistemic duties concerning the acquisition, storage, and transmission of information; the evaluation of evidence; and the revision or rejection of belief (see also ethics of belief ). In line with a reappraisal of virtue theory in business ethics, it is in particular virtue epistemology that has attracted attention from scholars working on finance. For example, while most commentators have focused on the moral failings that led to the financial crisis of 2008, a growing literature examines epistemic failures.

Epistemic failings in finance can be detected both at the level of individuals and collectives (de Bruin 2015). Organizations may develop corporate epistemic virtue along three dimensions: through matching epistemic virtues to particular functions (e.g., diversity at the board level); through providing adequate organizational support for the exercise of epistemic virtue (e.g., knowledge management techniques); and by adopting organizational remedies against epistemic vice (e.g., rotation policies). Using this three-pronged approach helps to interpret such epistemic failings as the failure of financial due diligence to spot Bernard Madoff’s notorious Ponzi scheme (uncovered in the midst of the financial crisis) (de Bruin 2014a, 2015).

Epistemic virtue is not only relevant for financial agents themselves, but also for other institutions in the financial system. An important example concerns accounting (auditing) firms. Accounting firms investigate businesses in order to make sure that their accounts (annual reports) offer an accurate reflection of the financial situation. While the primary intended beneficiaries of these auditing services are shareholders (and the public at large), accountants are paid by the firms they audit. This remuneration system is often said to lead to conflicts of interest. While accounting ethics is primarily concerned with codes of ethics and other management tools to minimize these conflicts of interests, an epistemological perspective may help to show that the business-auditor relationship should be seen as involving a joint epistemic agent in which the business provides evidence, and the auditor epistemic justification (de Bruin 2013). We will return to issues concerning conflicts of interest below (in section 4.2 ).

Epistemic virtue is also important for an effective governance or regulation of financial activities. For example, a salient epistemic failing that contributed to the 2008 financial crisis seems to be the way that Credit Rating Agencies rated mortgage-backed securities and other structured finance instruments, and with related failures of financial due diligence, and faulty risk management (Warenski 2008). Credit Rating Agencies provide estimates of credit risk of bonds that institutional investors are legally bound to use in their investment decisions. This may, however, effectively amount to an institutional setup in which investors are forced by law partly to outsource their risk management, which fails to foster epistemic virtue (Booth & de Bruin 2021, de Bruin 2017). Beyond this, epistemic failures can also occur among regulators themselves, as well as among relevant policy makers (see further in section 5.1 ).

A related line of work attests to the relevance of epistemic injustice to finance. Taking Fricker’s (2009) work as a point of departure, de Bruin (2021) examines testimonial injustice in financial services, whereas Mussell (2021) focuses on the harms and wrongs of testimonial injustice as they occur in the relationship between trustees and fiduciaries.

Compared to financial practitioners, one could think that financial economists should be at an epistemic advantage in matters of money and finance. Financial economics is a fairly young but well established discipline in the social sciences that seeks to understand, explain, and predict activities within financial markets. However, a few months after the crash in 2008, Queen Elizabeth II famously asked a room full of financial economists in London why they had not predicted the crisis (Egidi 2014). The Queen’s question should be an excellent starting point for an inquiry into the philosophy of science of financial economics. Yet only a few philosophers of science have considered finance specifically (Vergara Fernández & de Bruin 2021). [ 1 ]

Some important topics in financial economics have received partial attention, including the Modigliani-Miller capital structure irrelevance theorem (Hindriks 2008), the efficient market hypothesis (Collier 2011), the Black-Scholes option pricing model (Weatherall 2017), portfolio theory (Walsh 2015), financial equilibrium models (Farmer & Geanakoplos 2009), the concept of money (Mäki 1997), and behavioral finance (Brav, Heaton, & Rosenberg 2004), even though most of the debate still occurs among economists interested in methodology rather than among philosophers. A host of topics remain to be investigated, however: the concept of Value at Risk (VaR) (and more broadly the concept of financial risk), the capital asset pricing model (CAPM), the Gaussian copula, random walks, financial derivatives, event studies, forecasting (and big data), volatility, animal spirits, cost of capital, the various financial ratios, the concept of insolvency, and neurofinance, all stand in need of more sustained attention from philosophers.

Most existing work on finance in philosophy of science is concerned with models and modelling (see also models in science and philosophy of economics ). It seems intuitive to view financial markets as extremely complex systems: with so many different factors at play, predicting the price of securities (shares, bonds, etc.) seems almost impossible. Yet mainstream financial economics is firmly committed to the idea that market behavior should be understood as ultimately resulting from interactions of agents maximizing their expected utility. This is a direct application of the so-called neoclassical school of economics that was developed during the late nineteenth and early twentieth centuries. While this school continues to dominate textbooks in the field, there is a growing scholarly trend that seeks to criticize, complement or even replace some of its main assumptions. We can see how the problems play out in both corporate finance and asset pricing theory.

Corporate finance concerns the financing of firms. One question concerns a firm’s capital structure: should a firm obtain funding through equity (that is, from shareholders expecting dividends) or through debt (that is, from bondholders who lend money to the firm and have a contractual right to receive interest on the loans), or through a combination of the two. A key result in corporate finance is the Modigliani-Miller theorem, which says that a firm’s capital structure is irrelevant to its market value (Modigliani & Miller 1958). This theorem makes a number of highly unrealistic assumptions, among them the assumption that markets are efficient, and that there are no taxes. Alongside many other results in economics, it may therefore be considered as useless for predictive purposes; or even as dangerous, once used for such purposes nonetheless (Egidi 2014). In a detailed study of the Modigliani-Miller theorem, Hindriks (2008) has argued, however, that the value of highly idealized models in economics may lie in their providing counterfactual insights, just as in physics. Galileo’s law of free fall tells us what happens in a vacuum. Despite the fact that vacuum is rare in reality, the law is not uninformative, because it allows us to associate observed phenomena to the extent to which an unrealistic assumption must be relaxed. Similarly, if one of the assumptions that the Modigliani-Miller theorem makes is the absence of taxes, the observed relevance of capital structure may well have to be explained as resulting from particular tax regimes. The explanation obtained by relaxing unrealistic assumptions is called “explanation by concretization” (Hindriks 2008).

Explanation by concretization works if models and reality share at least a few concrete features. This is arguably the case for many extant models in finance, including models of bubbles and crises that are immediately relevant to explaining the 2008 crisis (Abreu & Brunnermeier 2003). A fairly recent development called “econophysics” may, however, be an exception. Econophysics uses physics methods to model financial markets (see Rickles 2007 for an overview). Where traditional models of crises include individual investors with beliefs and desires modelled by probability distributions and utility functions, econophysics models capture crises the way physicists model transitions of matter from fluid to solid state (Kuhlmann 2014).

Next, consider asset pricing theory. Ever since Bachelier’s groundbreaking mathematical treatment of asset pricing, financial economists have struggled to find the best way to determine the price developments of securities such as shares, bonds, and derivative instruments such as options. The mathematics of financial returns has received some attention in the literature (de Bruin & Walter 2017; Ippoliti & Chen 2017). Most models assume that returns follow Gaussian random walks, that is, stochastic processes in discrete time with independent and identically distributed increments. Empirical studies show, however, that returns are more peaked than Gaussian distributions, and that they have “fat tails”. This means that extreme events such as financial crises are far less improbable than the models assume. An exception with regards to these assumptions is Benoît Mandelbrot’s (1963) well-known contribution to financial mathematics, and work in this direction is gaining traction in mathematical finance.

A third aspect of financial models concerns the way they incorporate uncertainty (Bertolotti & Magnani 2017). Some of the problems of contemporary financial (and macroeconomic) models are due to the way they model uncertainty as risk, as outlined above (Frydman & Goldberg 2013). Both neo-classical models and behavioral economics capture uncertainty as probabilistic uncertainty, consequently ignoring Knightian uncertainty (Knight 1921 see also decision theory ). The philosophy of science literature that pertains to financial economics is, however, still fairly small (Vergara Fernández & de Bruin 2021).

Having considered the epistemic and scientific challenges of finance, we now turn to the broad range of compelling ethical challenges related to money and finance. The present part is divided into three sections, discussing 1) the claim that financial activities are always morally suspect, 2) various issues of fairness that can arise in financial markets, and 3) discussions about the social responsibilities of financial agents.

4.1 Money as the Root of All Evil?

Throughout cultural history, activities that involve money or finance have been subject to intense moral scrutiny and ethical debate. It seems fair to say that most traditional ethicists held a very negative attitude towards such activities. We will here discuss three very sweeping criticisms, respectively directed at the love of money (the profit motive), usury (lending at interest), and speculation (gambling in finance).

At the heart of many sweeping criticisms of money and finance lies the question of motive. For instance, the full Biblical quotation says that “the love of money is the root of all [kinds of] evil” (1 Timothy 6:10). To have a “love of money”, or (in less moralistic words) a profit motive, means to seek money for its own sake. It has been the subject of much moral criticism throughout history and continues to be controversial in popular morality.

There are three main variations of the criticism. A first variation says that there is something unnatural about the profit motive itself. For example, Aristotle argued that we should treat objects in ways that are befitting to their fundamental nature, and since money is not meant to be a good in itself but only a medium of exchange (see section 1.1 ), he concluded that it is unnatural to desire money as an end in itself ( Politics , 1252a–1260b). A similar thought is picked up by Marx, who argues that capitalism replaces the natural economic cycle of C–M–C (commodity exchanged for money exchanged for commodity) with M–C–M (money exchanged for commodity exchanged for money). Thus the endless accumulation of money becomes the sole goal of the capitalist, which Marx describes as a form of “fetishism” (Marx 1867, volume I).

A second variation of the criticism concerns the character, or more precisely the vice, that the profit motive is thought to exemplify (see also virtue ethics ). To have a love for money is typically associated with selfishness and greed, i.e., a desire to have as much as possible for oneself and/or more than one really needs (McCarty 1988, Walsh & Lynch 2008). Another association is the loss of moral scruples so that one is ready to do anything for money. The financial industry is often held out as the worst in this regard, especially because of its high levels of compensation. Allegations of greed soared after the 2008 crisis, when financial executives continued to receive million-dollar bonuses while many ordinary workers lost their jobs (Piketty 2014, McCall 2010, Andersson & Sandberg 2019).

A third variation of the criticism says that the profit motive signals the absence of more appropriate motives. Kant argued that actions only have moral worth if they are performed for moral reasons, or, more specifically, for the sake of duty. Thus it is not enough that we do what is right, we must also do it because it is right (Kant 1785). Another relevant Kantian principle is that we never should treat others merely as means for our own ends, but always also as ends in themselves (see also Kant’s moral philosophy ). Both of these principles seem to contrast with the profit motive which therefore is rendered morally problematic (Bowie 1999, Maitland 2002). It should come as no surprise that Kant was a strong critic of several examples of “commodification” and other market excesses (see also markets ).

There are two main lines of defensive argumentation. The most influential is Adam Smith’s well-known argument about the positive side-effects of a self-interested pursuit of profits: although the baker and brewer only aim at their own respective good, Smith suggested, they are “led by an invisible hand” to at the same time promote the public good (Smith 1776, see also Mandeville 1732). This argument is typically viewed as a consequentialist vindication of the profit motive (see also consequentialism ): positive societal effects can morally outweigh the possible shortcomings in individual virtue (Flew 1976).

A second argument is more direct and holds that the profit motive can exemplify a positive virtue. For example, there is the well-known Protestant work ethic that emphasizes the positive nature of hard work, discipline and frugality (Long 1972, Wesley 1771). The profit motive can, on this view, be associated with virtues such as ambition, industry, and discipline (see also Brennan 2021). According to Max Weber (1905), the Protestant work ethic played an important role in the development of capitalism. But it is not clear whether any of these arguments can justify an exclusive focus on profits, of course, or rather give permission to also focus on profits under certain circumstances.

If having a love of money seems morally suspect, then the practice of making money on money—for instance, lending money at interest—could seem even worse. This is another sweeping criticism directed at finance that can be found among the traditional ethicists. Societies in both Ancient and Medieval times typically condemned or banned the practice of “usury”, which originally meant all charging of interest on loans. As the practice started to become socially acceptable, usury came to mean the charging of excessive rates of interest. However, modern Islam still contains a general prohibition against interest, and many countries still have at least partial usury laws, most often setting an upper limit on interest rates.

What could be wrong with lending at interest? Some of the more obscure arguments concern the nature of money (again): Aristotle argued that there is something unnatural with “money begetting money”. While he allowed that money is a useful means for facilitating commercial exchange, Aristotle thought that it has no productive use in itself and so receiving interest over and above the borrowed amount is unnatural and wrong ( Politics , 1258b). A related argument can be found in Aquinas, who argued that money is a good that is consumed on use. Although a lender can legitimately demand repayment of an amount equivalent to the loan, it is illegitimate to demand payment for the use of the borrowed amount and so adding interest is unnatural and wrong ( Summa Theologica , II–II, Q78).

Some more promising arguments concern justice and inequality. For example, as early as Plato we see the expression of the worry that allowing interest may lead to societal instability ( The Republic , II). It may be noted that the biblical condemnations of usury most straightforwardly prohibit interest-taking from the poor. One idea here is that we have a duty of charity to the poor and charging interest is incompatible with this duty. Another idea is that the problem lies in the outcome of interest payments: Loans are typically extended by someone who is richer (someone with capital) to someone who is poorer (someone without it) and so asking for additional interest may increase the inequitable distribution of wealth (Sandberg 2012, Visser & MacIntosh 1998). A third idea, which is prominent in the protestant tradition, is that lending often involves opportunism or exploitation in the sense of offering bad deals to poor people who have no other options (Graafland 2010).

The Islamic condemnation of interest, or riba , adds an additional, third line of argument which holds that interest is essentially unearned or undeserved income: Since the lender neither partakes in the actual productive use of the money lent, nor exposes him- or herself to commercial risk, the lender cannot legitimately share in the gains produced by the loan (Ayub 2007, Birnie 1952, Thomas 2006). Based on this argument, contemporary Islamic banks insist that lenders and borrowers must form a business partnership in order for fees on loans to be morally legitimate (Ayub 2007, Warde 2010). Economists have over the years given several retorts to this argument. Some economists stress that lending also involves risk (e.g., that the borrower defaults and is unable to repay); others stress the so-called opportunity costs of lending (i.e., that the money could have been used more profitably elsewhere); and yet again others stress the simple time-preference of individuals (i.e., that we value present more than future consumption, and therefore the lender deserves compensation for postponing consumption).

The gradual abandonment of the medieval usury laws in the West is typically attributed to a growing acknowledgment of the great potential for economic growth unleashed by easy access to capital. One could perhaps say that history itself disproved Aristotle: money indeed proved to have a productive use. In a short text from 1787, Bentham famously poked fun at many of the classical anti-usury arguments and defended the practice of charging interest from a utilitarian standpoint (Bentham 1787). However, this does not mean that worries about the ethics of charging interest, and allegations of usury, have disappeared entirely in society. As noted above, usury today means charging interest rates that seem excessive or exorbitant. For instance, many people are outraged by the rates charged on modern payday loans, or the way in which rich countries exact interest on their loans from poor countries (Baradaran 2015, Graeber 2011, Herzog 2017a). These intuitions have clear affinities with the justice-based arguments outlined above.

A sweeping criticism of a more contemporary nature concerns the supposed moral defects of speculation. This criticism tends to be directed towards financial activities that go beyond mere lending. Critics of the capitalist system often liken the stock market to a casino and investors to gamblers or punters (Sinn 2010, Strange 1986). More moderate critics insist on a strict distinction between investors or shareholders, on the one hand, and speculators or gamblers, on the other (Bogle 2012, Sorell & Hendry 1994). In any case, the underlying assumption is that the similarities between modern financial activities and gambling are morally troublesome.

On some interpretations, these concerns are similar to those raised above. For example, some argue that speculators are driven by the profit motive whereas investors have a genuine concern for the underlying business enterprise (Hendry 2013). Others see speculation as “parasitic”, that is, to be without productive use, and solely dependent on luck (Borna & Lowry 1987, Ryan 1902). This latter argument is similar to the complaint about undeserved income raised in particular by Islamic scholars (Ayub 2007, Warde 2010).

A more distinct interpretation holds that speculation typically includes very high levels of risk-taking (Borna & Lowry 1987). This is morally problematic when the risks not only affect the gambler him or herself but also society as a whole. A root cause of the financial crisis of 2008 was widespread speculation on very risky derivatives such as “synthetic collateralized debt obligations” (see section 1.2 ). When the value of such derivatives fell dramatically, the financial system as a whole came to the brink of collapse. We will return to this issue below (in section 4.3.1 ). In this regard, the question of risk imposition becomes important too (Moggia 2021).

A related interpretation concerns the supposed short-sightedness of speculation. It is often argued that financial agents and markets are “myopic” in the sense that they care only about profits in the very near term, e.g., the next quarter (Dallas 2012). Modern disclosure requirements force companies to publish quarterly earnings reports. The myopia of finance is typically blamed for negative effects such as market volatility, the continuous occurrence of manias and crashes, inadequate investment in social welfare, and the general shortsightedness of the economy (e.g., Lacke 1996).

Defenders of speculation argue that it can serve a number of positive ends. To the extent that all financial activities are speculative in some sense, of course, the ends coincide with the function of finance more generally: to channel funds to the individuals or companies who can use them in the most productive ways. But even speculation in the narrower sense—of high-risk, short-term bets—can have a positive role to play: It can be used to “hedge” or off-set the risks of more long-term investments, and it contributes to sustaining “market liquidity” (that is, as a means for providing counterparties to trade with at any given point of time) which is important for an efficient pricing mechanism (Angel & McCabe 2009, Koslowski 2009).

4.2 Fairness in Financial Markets

Let us now assume that the existence of financial markets is at least in general terms ethically acceptable, so that we can turn to discuss some of the issues involved in making them fair and just for all parties involve. We will focus on three such issues: deception and fraud (honesty), conflicts of interest (care for customers), and insider trading (fair play).

Some of the best-known ethical scandals in finance are cases of deception or fraud. Enron, a huge US corporation, went bankrupt after it was discovered that its top managers had “cooked the books”, i.e., engaged in fraudulent accounting practices, keeping huge debts off the company’s balance sheet in an effort to make it look more profitable (McLean & Elkind 2003). Other scandals in the industry have involved deceptive marketing practices, hidden fees or costs, undisclosed or misrepresented financial risks, and outright Ponzi schemes (see section 2 ).

While these examples seem obvious, on further examination it is not easy to give an exact definition of financial deception or fraud. The most straightforward case seems to be deliberately misrepresenting or lying about financial facts. However, this assumes that there is such a thing as a financial fact, i.e., a correct way of representing a financial value or transaction. In light of the socially constructed nature of money and finance (see section 1 ), this may not always be clear. Less straightforward cases include simply concealing or omitting financial information, or refraining from obtaining the information in the first place.

A philosophical conception of fraud, inspired by Kant, defines it as denying to the weaker party in a financial transaction (such as a consumer or investor) information that is necessary to make a rational (or autonomous) decision (Boatright 2014, Duska & Clarke 2002). Many countries require that the seller of a financial product (such a company issuing shares) must disclose all information that is “material” to the product. It is an interesting question whether this suggestion, especially the conception of rationality involved, should include or rule out a consideration of the ethical nature of the product (such as the ethical nature of the company’s operations) (Lydenberg 2014). Furthermore, there may be information that is legitimately excluded by other considerations, such as the privacy of individuals or companies commonly protected by “bank secrecy” laws.

But is access to adequate information enough? A complication here is that the weaker party, especially ordinary consumers, may have trouble processing the information sufficiently well to identify cases of fraud. This is a structural problem in finance that has no easy fix, because financial products are often abstract, complex, and difficult to price. Therefore, full autonomy of agents may not only require access to adequate information, but also access to sufficient know how, processing ability and resources to analyze the information (Boatright 2014). One solution is to require that the financial services industry promotes transparent communication in which they track the understanding of ordinary consumers (de Bruin 2014b, Endörfer & De Bruin 2019, Shiller 2012).

Due to the problems just noted, the majority of ordinary consumers refrain from engaging in financial markets on their own and instead rely on the services of financial intermediaries, such as banks, investment funds, and insurance companies. But this opens up new ethical problems that are due to the conflicts of interest inherent in financial intermediation. Simply put, the managers or employees of intermediaries have ample opportunity, and often also incentives, to misuse their customers’ money and trust.

Although it is once again difficult to give an exact definition, the literature is full of examples of such misuse—including so-called churning (trading excessively to generate high fees), stuffing (selling the bank’s undesired assets to a client), front-running (buying an asset for the bank first and then reselling it to the client at a higher price) and tailgating (mimicking a client’s trade to piggyback on his/her information) (Dilworth 1994; Heacock, Hill, & Anderson 1987). Interestingly, some argue that the whole industry of actively managed investment funds may be seen as a form of fraud. According to economic theory, namely, it is impossible to beat the average returns of the market for any given level of financial risk, at least in the long term. Therefore, funds who claim that they can do this for a fee are basically cheating their clients (cf. Hendry 2013, Kay 2015).

A legal doctrine that aims to protect clients is so-called fiduciary duty, which imposes obligations on fiduciaries (those entrusted with others’ money) to act in the sole interest of beneficiaries (those who own the money). The interests referred to are typically taken to be financial interests, so the obligation of the fiduciary is basically to maximize investment returns. But some argue that there are cases in which beneficiaries’ broader interests should take precedence, such as when investing in fossil fuels may give high financial returns but pose serious risks to people’s future (Lydenberg 2014; Sandberg 2013, 2016). In any case, it is often thought that fiduciary duties go beyond the ideal of a free market to instead give stronger protection to the weaker party of a fragile relationship.

As an alternative or compliment to fiduciary duty, some argue for the adoption of a code of ethics or professional conduct by financial professionals. A code of ethics would be less arduous in legal terms and is therefore more attractive to free market proponents (Koslowski 2009). It can also cover other fragile relationships (including those of bank-depositor, advisor-client, etc.). Just as doctors and lawyers have a professional code, then, so finance professionals could have one that stresses values such as honesty, due care and accuracy (de Bruin 2016, Graafland & Ven 2011). But according to critics, the financial industry is simply too subdivided into different roles and competencies to have a uniform code of ethics (Ragatz & Duska 2010). It is also unclear whether finance can be regarded as a profession in the traditional sense, which typically requires a body of specialized knowledge, high degrees of organization and self-regulation, and a commitment to public service (Boatright 2014, Herzog 2019).

Probably the most well-known ethical problem concerning fairness in finance, and also perhaps the one on which philosophers most disagree, is so-called insider trading. Put simply, this occurs when an agent uses his or her position within, or privileged information about, a company to buy or sell its shares (or other related financial assets) at favorable times and prices. For example, a CEO may buy shares in his or her company just before it announces a major increase in earnings that will boost the share price. While there is no fraud or breach of fiduciary duty, the agent seems to be exploiting an asymmetry of information.

Just as in the cases above, it is difficult to give an exact definition of insider trading, and the scope of its operative definition tends to vary across jurisdictions. Most commentators agree that it is the information and its attendant informational asymmetry that counts and, thus, the “insider” need not be inside the company at all—those abusing access to information could be family, friends or other tippees (Irvine 1987a, Moore 1990). Indeed, some argue that even stock analysts or journalists can be regarded as insiders if they trade on information that they have gathered themselves but not yet made publicly available. It is also debatable whether an actual trade has to take place or whether insider trading can consist in an omission to trade based on inside information, or also in enabling others to trade or not trade (Koslowski 2009).

Several philosophical perspectives have been used to explain what (if anything) is wrong with insider trading. A first perspective invokes the concept of fair play. Even in a situation with fully autonomous traders, the argument goes, market transactions are not fair if one party has access to information that the other has not. Fair play requires a “level playing field”, i.e., that no participant starts from an unfairly advantaged position (Werhane 1989, 1991). However, critics argue that this perspective imposes excessive demands of informational equality. There are many asymmetries of information in the market that are seemingly unproblematic, e.g., that an antiquary knows more about antiques than his or her customers (Lawson 1988, Machan 1996). So might it be the inaccessibility of inside information that is problematic? But against this, one could argue that, in principle, outsiders have the possibility to become insiders and thus to obtain the exact same information (Lawson 1988, Moore 1990).

A second perspective views insider trading as a breach of duty, not towards the counterparty in the trade but towards the source of the information. US legislation treats inside information as the property of the underlying company and, thus, insider trading is essentially a form of theft of corporate property (often called the misappropriation theory) (Lawson 1988). A related suggestion is that it can be seen as a violation of the fiduciary duty that insiders have towards the company for which they work (Moore 1990). However, critics argue that the misappropriation theory misrepresents the relationship between companies and insiders. On the one hand, there are many normal business situations in which insiders are permitted or even expected to spread inside information to outside sources (Boatright 2014). On the other hand, if the information is the property of the company, why do we not allow it to be “sold” to insiders as a form of remuneration? (Engelen & van Liedekerke 2010, Manne 1966)

A third perspective deals with the effects, both direct and indirect, of allowing insider trading. Interestingly, many argue that the direct effects of such a policy might be positive. As noted above, one of the main purposes of financial markets is to form (or “discover”) prices that reflect all available information about a company. Since insider trading contributes important information, it is likely to improve the process of price discovery (Manne 1966). Indeed, the same reasoning suggests that insider trading actually helps the counterparty in the trade to get a better price (since the insider’s activity is likely to move the price in the “right” direction) so it is a victimless crime (Engelen & Liedekerke 2010). However, others express concern over the indirect effects, which are likely to be more negative. Allowing insider trading may erode the moral standards of market participants by favoring opportunism over fair play (Werhane 1989). Moreover, many people may be dissuaded from even participating in the market since they feel that it is “rigged” to their disadvantage (Strudler 2009).

4.3 The Social Responsibility of Finance

We will now move on to take a societal view on finance, and discuss ideas relating to the broader social responsibilities of financial agents, that go beyond their basic role as market participants. We will discuss three such ideas here, respectively focusing on systemic risk (a responsibility to avoid societal harm), microfinance (a responsibility towards the poor or unbanked), and socially responsible investment (a responsibility to help address societal challenges).

One root cause of the financial crisis of 2008 was the very high levels of risk-taking of many banks and other financial agents. When these risks materialized, the financial system came to the brink of collapse. Many banks lost so much money that their normal lending operations were hampered, which in turn had negative effects on the real economy, with the result that millions of “ordinary” people around the world lost their jobs. Many governments stepped in to bail out the banks and in consequence sacrificed other parts of public spending. This is a prime example of how certain financial activities, when run amok, can have devastating effects on third parties and society in general.

Much subsequent debate has focused on so-called systemic risk, that is, the risk of failures across several agents which impairs the functioning of the financial system as such (Brunnermeier & Oehmke 2013, Smaga 2014). The concept of systemic risk gives rise to several prominent ethical issues. To what extent do financial agents have a moral duty to limit their contributions to systemic risk? It could be argued that financial transactions always carry risk and that this is “part of the game”. But the important point about systemic risk is that financial crises have negative effects on third parties (so-called externalities). This constitutes a prima facie case for a duty of precaution on the part of financial agents, based on the social responsibility to avoid causing unnecessary harm (James 2017, Linarelli 2017). In cases where precaution is impossible, one could add a related duty of rectification or compensation to the victims of the harm (Endörfer 2022). It is, however, a matter of philosophical dispute whether finance professionals can be held morally responsible for these harms (de Bruin 2018, Moggia 2021).

Two factors determine how much an agent’s activity contributes to systemic risk (Brunnermeier & Oehmke 2013, Smaga 2014). The first is financial risk of the agent’s activity in the traditional sense, i.e., the probability and size of the potential losses for that particular agent. A duty of precaution may here be taken to imply, e.g., stricter requirements on capital and liquidity reserves (roughly, the money that the agents must keep in their coffers for emergency situations) (Admati & Hellwig 2013). The second factor is the agent’s place in the financial system, which typically is measured by its interconnectedness with—and thereby potential for cascading effects upon—other agents. This factor indicates that the duty of precaution is stronger for financial agents that are “systemically important” or, as the saying goes, “too-big-to-fail” institutions (Stiglitz 2009).

As an alternative to the reasoning above, one may argue that the duty of precaution is more properly located on the collective, i.e., political level (James 2012, 2017). We return to this suggestion below (in section 5.1 ).

Even in normal times, people with very low income or wealth have hardly any access to basic financial services. Commercial banks have little to gain from offering such services to them; there is an elevated risk of loan losses (since the poor lack collateral) and it is costly to administer a large amount of very small loans (Armendáriz & Morduch 2010). Moreover, there will likely be cases where some bank officers discriminate against underprivileged groups, even where extensive legal protection is in place. An initiative that seeks to remedy these problems is “microfinance”, that is, the extension of financial services, such as lending and saving, to poor people who are otherwise “unbanked”. The initiative started in some of the poorest countries of the world, such as Bangladesh and India.

The justifications offered for microfinance are similar to the justifications offered for development aid. A popular justification holds that affluent people have a duty of assistance towards the poor, and microfinance is thought to be a particularly efficient way to alleviate poverty (Yunus 1998, 2007). But is this correct? Judging from the growing number of empirical “impact studies”, it seems more correct to say that microfinance is sometimes helpful, but at other times can be either ineffective or have negative side-effects (Hudon & Sandberg 2013, Roodman 2012). Another justification holds that there is a basic human right to subsistence, and that this includes a right to savings and credit (Hudon 2009, Meyer 2018). But critics argue that the framework of human rights is not a good fit for financial services that come with both benefits and challenges (Gershman & Morduch 2015, Sorell 2015).

Microfinance is of course different from development aid in that it involves commercial banking relations. This invites the familiar political debate of state- versus market-based support. Proponents of microfinance argue that traditional state-led development projects have been too rigid and corrupt, whereas market-based initiatives are more flexible and help people to help themselves (Armendáriz & Morduch 2010, Yunus 2007). According to critics, however, it is the other way around: Markets will tend to breed greed and inequality, whereas real development is created by large-scale investments in education and infrastructure (Bateman 2010, H. Weber 2004).

In recent years, the microfinance industry has witnessed several “ethical scandals” that seemingly testify to the risk of market excesses. Reports have indicated that interest rates on microloans average at 20–30% per annum, and can sometimes be in excess of 100%, which is much higher than the rates for non-poor borrowers. This raises questions about usury (Hudon & Ashta 2013; Rosenberg, Gonzalez, & Narain 2009). However, some suggest a defense of “second best”, or last resort, when other sources of aid or cheaper credit are unavailable (Sandberg 2012). Microfinance institutions have also been accused of using coercive lending techniques and forceful loan recovery practices (Dichter & Harper (eds) 2007; Priyadarshee & Ghalib 2012). This raises questions about the ethical justifiability of commercial activity directed at the desperately poor, because very poor customers may have no viable alternative to accepting deals that are both unfair and exploitative (Arnold & Valentin 2013, Hudon & Sandberg 2013).

Socially responsible investment refers to the emerging practice whereby financial agents give weight to putatively ethical, social or environmental considerations in investment decisions—e.g., decisions about what bonds or stocks to buy or sell, or how to engage with the companies in one’s portfolio. This is sometimes part of a strictly profit-driven investment philosophy, based on the assumption that companies with superior social performance also have superior financial performance (Richardson & Cragg 2010). But more commonly, it is perceived as an alternative to mainstream investment. The background argument here is that market pricing mechanisms, and financial markets in particular, seem to be unable to promote sufficient levels of social and environmental responsibility in firms. Even though there is widespread social agreement on the evils of sweatshop labor and environmental degradation, for instance, mainstream investors are still financing enterprises that sustain such unjustifiable practices. Therefore, there is a need for a new kind of investor with a stronger sense of social responsibility (Sandberg 2008, Cowton & Sandberg 2012).

The simplest and most common approach among these alternative investors is to avoid investments in companies that are perceived to be ethically problematic. This is typically justified from a deontological idea to the effect that it is wrong to invest in someone else’s wrongdoing (Irvine 1987b, Langtry 2002, Larmer 1997). There are at least three interpretations of such moral “taint”: (1) the view that it is wrong in itself to profit from others’ wrongdoings, or to benefit from other people’s suffering; (2) the view that it is wrong to harm others, or also to facilitate harm to other; or (3) the view that there is a form of expressive or symbolic wrongdoing involved in “morally supporting” or “accepting” wrongful activities.

The deontological perspective above has been criticized for being too black-and-white. On the one hand, it seems difficult to find any investment opportunity that is completely “pure” or devoid of possible moral taint (Kolers 2001). On the other hand, the relationship between the investor and the investee is not as direct as one may think. To the extent that investors buy and sell shares on the stock market, they are not engaging with the underlying companies but rather with other investors. The only way in which such transactions could benefit the companies would be through movements in the share price (which determines the companies’ so-called cost of capital), but it is extremely unlikely that a group of ethical investors can significantly affect that price. After all, the raison d’être of stock exchanges is exactly to create markets that are sufficiently liquid to maintain stable prices (Haigh & Hazelton 2004, Hudson 2005). In response to this, the deontologist could appeal to some notion of universalizability or collective responsibility: perhaps the right question to ask is not “what happens if I do this?” but instead “what happens if we all do this?”. However, such more complicated philosophical positions have problems of their own (see also rule consequentialism and collective responsibility )

A rival perspective on socially responsible investment is the (more straightforward) consequentialist idea that investors’ duty towards society consists in using their financial powers to promote positive societal goods, such as social justice and environmental sustainability. This perspective is typically taken to prefer more progressive investment practices, such as pushing management to adopt more ambitious social policies and/or seeking out environmentally friendly technology firms (Mackenzie 1997, Sandberg 2008). Of course, the flip side of such practices, which may explain why they are less common in the market, is that they invite greater financial risks (Sandberg 2011). It remains an open question whether socially responsible investment will grow enough in size to make financial markets a force for societal change.

Recent work has started exploring whether concrete sustainable finance policies (such as those suggested by the European Commission’s Sustainable Finance Action Plan) will generate sufficient funds to pay for climate change mitigation and adaptation, based as they are on policies of information provision only (De Bruin 2023).

5. Political Philosophy

Discussions about the social responsibility of finance are obviously premised on the observation that the financial system forms a central infrastructure of modern economies and societies. As we noted at the outset, it is important to see that the system contains both private elements (such as commercial banks, insurance companies, and investment funds) and public elements (such as central banks and regulatory bodies). However, issues concerning the proper balance between these elements, especially the proper role and reach of the state, are perennially recurrent in both popular and philosophical debates.

The financial system and the provision of money indeed raise a number of questions that connect it to the “big questions” of political philosophy: including questions of democracy, justice, and legitimacy, at both the national and global levels (on the history of political thinking about money see Eich 2019, 2020, 2022; Ingham 2004, 2019; Martin 2013). The discussions around finance in political philosophy can be grouped under three broad areas: financialization and democracy; finance, money and domestic justice; and finance and global justice. We consider these now in turn.

Many of the questions political philosophy raises about finance have to do with “financialization”. The phenomenon of “financialization”, whereby the economic system has become characterized by the increasing dominance of finance capital and by systems of financial intermediation (Ertürk et al. 2008; Davis 2011; Engelen et al. 2011; Palley 2013), is of potentially substantial normative significance in a number of regards. A related normative concern is the potential growth in political power of the financial sector, which may be seen as a threat to democratic politics.

These worries are, in effect, an amplification of familiar concerns about the “structural power” or “structural constraints” of capital, whereby capitalist investors are able to reduce the freedom of action of democratic governments by threatening “investment strikes” when their preferred political options are not pursued (see Lindblom 1977, 1982; Przeworski & Wallerstein 1988; Cohen 1989; B. Barry 2002; Christiano 2010, 2012; Furendal & O’Neill 2022). To take one recent version of these worries, Stuart White argues that a republican commitment to popular sovereignty is in significant tension with the acceptance of an economic system where important choices about investment, and hence the direction of development of the economy, are under the control of financial interests (White 2011).

In many such debates, the fault-line seems to be the traditional one between those who favor social coordination by free markets, and hence strict limitations on state activities, and those who favor democratic politics, and hence strict limitations on markets (without denying that there can be intermediate positions). But the current financial system is not a pure creature of the free market. In the financial system that we currently see, the principle that individuals are to be held financially accountable for their actions, and that they will therefore be “disciplined” by markets, is patchy at best. One major issue, discussed above, is the problem of banks that are so large and interconnected that their failure would risk taking down the whole financial system—hence, they can anticipate that they will be bailed out by tax-payers’ money, which creates a huge “moral hazard” problem (e.g., Pistor 2013, 2017). In addition, current legal systems find it difficult to impose accountability for complex processes of divided labor, which is why there were very few legal remedies after the financial crisis of 2008 (e.g., Reiff 2017).

The lack of accountability intensifies worries about the power relations between democratic politicians and individuals or corporations in the financial realm. One question is whether we can even apply our standard concept of democracy to societies that have the kinds of financial systems we see today. We may ask whether societies that are highly financialized can ever be true democracies, or whether they are more likely to be “post-democracies” (Crouch 2004). For example, states with high levels of sovereign debt will need to consider the reaction of financial markets in every significant policy decision (see, e.g., Streeck 2013 [2014], see also Klein 2020) Moreover “revolving doors” between private financial institutions and supervising authorities impact on the ability of public officials to hold financial agents accountable. This is similar to the problems of conflicts of interest raised above (see sections 2 and 4.2.2 ). If financial contracts become a central, or maybe even the most central, form of social relations (Lazzarato 2012), this may create an incompatibility with the equal standing of citizens, irrespective of financial position, that should be the basis of a democratic society and its public sphere of deliberation (see also Bennett 2020 from an epistemic perspective).

While finance has, over long stretches of history, been rather strictly regulated, there has been a reversed trend towards deregulation since roughly the 1970s. After the financial crisis of 2008, there have been many calls for reregulation. Proposals include higher capital ratios in banks (Admati & Hellwig 2013), a return to the separation of commercial banking from speculative finance, as had been the case, in the US, during the period when the Glass-Steagall Act was in place (Kay 2015), or a financial transaction tax (Wollner 2014). However, given that the financial system is a global system, one controversial question is whether regulatory steps by single countries would have any effect other than capital flight.

When it comes to domestic social justice, the central question relating to the finance system concerns the ways in which the realization of justice can be helped or hindered by how the financial system is organized.

A first question here, already touched upon in the discussion about microfinance above ( section 4.3.2 ), concerns the status of citizens as participants in financial markets. Should they all have a right to certain financial services such as a bank account or certain forms of loans, because credit should be seen as a primary good in capitalist economies (see, e.g., Hudon 2009, Sorell 2015, Meyer 2018)? More broadly, how does the pattern of access to credit affect the distribution of freedom and unfreedom within society? (see Dietsch 2021; Preiss 2021). These are not only issues for very poor countries, but also for richer countries with high economic inequality, where it becomes a question of domestic justice. In some countries all residents have the right to open a basic bank account (see bank accounts in the EU in Other Internet Resources ). For others this is not the case. It has been argued that not having access to basic financial services creates an unfairness, because it drives poorer individuals into a cash economy in which they are more vulnerable to exploitative lenders, and in which it is more difficult to build up savings (e.g., Baradaran 2015). Hence, it has been suggested either to regulate banking services for individuals more strictly (e.g., Herzog 2017a), to consider various forms of household debt relief (Persad 2018), or to offer a public banking service, e.g., run by the postal office, which offers basic services at affordable costs (Baradaran 2015).

Secondly, financialization may also have more direct effects on socio-economic inequality. Those with managerial positions within the financial sector are disproportionately represented among the very top end of the income distribution, and so the growth of inequality can in part be explained by the growth in the financial sector itself (Piketty 2014). There may also be an effect on social norms, whereby the “hypermeritocratic” norms of the financial sector have played a part in increasing social tolerance for inequality in society more broadly (Piketty 2014: 265, 2020; see also O’Neill 2017, 2021). As Dietsch et al. point out, the process of increasing financialization within the economies of the advanced industrial societies has been encouraged by the actions of central banks over recent decades, and so the issue of financialization also connects closely to questions regarding the justice and legitimacy of central banks and monetary policy (Dietsch, Claveau, & Fontan 2016, 2018; see also Jacobs & King 2016).

Thirdly, many debates about the relation between distributive justice and the financial system revolve around the market for mortgages, because for many individuals, a house is the single largest item for which they need to take out a loan, and their mortgage their main point of interaction with the financial system. This means that the question of who has access to mortgage loans and at what price can have a major impact on the overall distribution of income and wealth. In addition, it has an impact on how financial risks are distributed in society. Highly indebted individuals are more vulnerable when it comes to ups and downs either in their personal lives (e.g., illness, loss of job, divorce) or in the economy as a whole (e.g., economic slumps) (Mian & Sufi 2014). The danger here is that existing inequalities—which many theories of justice would describe as unjust—are reinforced even further (Herzog 2017a).

Here, however, a question about the institutional division of labor arises: which goals of distributive justice should be achieved within markets—and specifically, within financial markets—and which ones by other means, for example through taxation and redistribution? The latter has been the standard approach used by many welfare systems: the idea being to let markets run their course, and then to achieve the desired patterns of distribution by taxation and redistribution. If one remains within that paradigm, questions arise about whether the financial sector should be taxed more highly. In contrast, the approach of “pre-distribution” (Hacker 2011; O’Neill & Williamson 2012; O’Neill 202), or what Dietsch calls “process redistribution” (2010), is to design the rules of the economic game such that they contribute to bringing about the distributive pattern that is seen as just. This could, for example, mean regulating banking services and credit markets in ways that reduce inequality, for example by imposing regulations on payday lenders and banks, so that poor individuals are protected from falling into a spiral of ever higher debt. A more radical view could be to see the financial problems faced by such individuals as being caused by more general structural injustices the solution of which does not necessarily require interventions with the financial industry, but rather more general redistributive (or predistributive) policies.

Money creation: Another alternative theoretical approach is to integrate distributive concerns into monetary policy, i.e., when it comes to the creation of money. So far, central banks have focused on the stability of currencies and, in some cases, levels of employment. This technical focus, together with the risk that politicians might abuse monetary policy to try to boost the economy before elections, have been used in arguments for putting the control of the money supply into the hands of technical experts, removing monetary policy from democratic politics. But after the financial crisis of 2008, many central banks have used unconventional measures, such as “quantitative easing”, which had strongly regressive effects, favoring the owners of stocks or of landed property (Fontan et al. 2016, Dietsch 2017); they did not take into account other societal goals, e.g., the financing of green energy, either. This raises new questions of justice: are such measures justified if their declared aim is to move the economy out of a slump, which presumably also helps disadvantaged individuals (Haldane 2014)? Would other measures, for instance “helicopter money” that is distributed to all citizens, have been a better alternative? And if such measures are used, is it still appropriate to think of central banks as institutions in which nothing but technical expertise is required, or should there be some form of accountability to society? (Fontan, Claveau, & Dietsch 2016; Dietsch 2017; Riles 2018; see also Tucker 2018; van ’t Klooster 2020; James & Hockett 2020, Downey 2021). [ 2 ]

We have already discussed the general issue of the ontological status of money ( section 1.1 above). But there are also significant questions in political philosophy regarding the question of where, and by what sorts of institutions, should the money supply be controlled. One complicating factor here is the extensive disagreement about the institutional basis of money creation, as described above. One strand of the credit theory of money emphasizes that in today’s world, money creation is a process in which commercial banks play a significant role. These banks in effect create new money when they make new loans to individual or business customers (see McLeay, Radia, & Thomas 2014; see also Palley 1996; Ryan-Collins et al. 2012; Werner 2014a,b). James Tobin refers to commercial bank-created money, in an evocative if now dated image as “fountain pen money”, that is, money created with the swish of the bank manager’s fountain pen (Tobin 1963).

However, the relationship between private commercial banks and the central bank is a complicated one, such that we might best think of money creation as a matter involving a kind of hybrid public-private partnership. Hockett and Omarova refer to this relationship as constituting a “finance franchise”, with private banks being granted on a “franchise” basis the money-creating powers of the sovereign monetary authority, while van ’t Klooster describes this relation between the public and private as constituting a “hybrid monetary constitution” (Hockett & Omarova 2017; van ’t Klooster 2017; see also Bell 2001). In this hybrid public-private monetary system, it is true that private commercial banks create money, but they nevertheless do so in a way that involves being regulated and subject to the authority of the central bank within each monetary jurisdiction, with that central bank also acting as “lender of last resort” (Bagehot 1873) when inter-bank lending dries up. [ 3 ]

When the curious public-private nature of money creation is brought into focus, it is not surprising that there should exist views advocating a shift away from this hybrid monetary constitution, either in the direction of a fully public option, or a fully private system of money creation.

Advocates of fully public banking envisage a system in which private banks are stripped of their authority to create new money, and where instead the money supply is directly controlled either by the government or by some other state agency; for example by the central bank lending directly to firms and households. Such a position can be defended on a number of normative grounds: that a public option would allow for greater financial stability, that a fully public system of money creation would allow a smoother transmission of democratic decisions regarding economic governance; or simply because of the consequences of such a system with regards to socioeconomic inequality and environmental sustainability (see Jackson & Dyson 2012; Wolf 2014a,b; Lainà 2015; Dyson, Hodgson, & van Lerven 2016a,b; Ingham, Coutts, & Konzelmann 2016; Dow 2016; Wodruff 2019; van’t Klooster 2019, Mellor 2019, Dietsch 2021; for commentary and criticism see Goodhart & Jensen 2015; Fontana & Sawyer 2016, Larue et al. 2020).

In stark contrast, a number of libertarian authors have defended the view that the central bank should have no role in money creation, with the money supply being entirely a matter for private suppliers (and with the consumers of money able to choose between different rival suppliers), under a system of “free banking” (e.g., Simons 1936; Friedman 1962; von Hayek 1978; Selgin 1988). Advocacy of private money creation has received a more recent stimulus with the rise of Bitcoin and other crypto-currencies, with some of Bitcoin’s advocates drawing on similar libertarian arguments to those offered by Hayek and Selgin (see Golumbia 2016, Robison 2022). One can also mention the “alternative currencies” movement here which defends private money creation on entirely different grounds, most often by appeal to the value of community (see Larue 2022, Larue et al. 2022).

Finally, a number of issues relate questions about finance to questions about global justice. The debate about global justice (see also global justice ) has weighed the pros and cons of “statist” and “cosmopolitan” approaches, that is, approaches to justice that would focus on the nation state (maybe with some additional duties of beneficence to the globally poor) or on the global scale. The financial system is one of the most globalized systems of social interaction that currently exist, and global entanglements are hard to deny (e.g., Valentini 2011: 195–8). The question thus is whether this creates duties of justice on the financial system, and if so, whether it fulfills these duties, i.e., whether it contributes to making the world more globally just, or whether it tends in the opposite direction (or whether it is neutral).

There are a number of institutions, especially the World Bank and the International Monetary Fund (IMF), that constitute a rudimentary global order of finance. Arguably, many countries, especially poorer ones, cannot reasonably opt out of the rules established by these institutions (e.g., Hassoun 2012, Krishnamurthy 2014). It might therefore appear to be required by justice that these institutions be governed in a way that represents the interests of all countries. But because of historical path-dependencies, and because a large part of their budget comes from Western countries, the governance structures are strongly biased in their favor (for example, the US can veto all important decisions in the IMF). Miller (2010: 134–41) has described this situation as “indirect financial rule” by the US (see also Herzog 2021).

An issue worth noting in this context is the fact that the US dollar, and to a lesser degree the Euro, function as de facto global currencies, with a large part of global trade being conducted in these currencies (e.g., Mehrling 2011, Eichengreen 2011). This allows the issuing countries to run a current account deficit, which amounts to a redistribution from poorer to richer countries for which compensation might be owed (Reddy 2005: 224–5). This fact also raises questions about the distribution of power in the global sphere, which has often been criticized as favoring Western countries (e.g., Gulati 1980, United Nations 2009). However, global financial markets serve not only to finance trade in goods and services; there are also questions about fluctuations in these markets that result exclusively from speculations (see also sect.1.4.3 above). Such fluctuations can disproportionately harm poorer countries, which are more vulnerable to movements of capital or rapid changes in commodity prices. Hence, an old proposal that has recently been revived and defended from a perspective of global justice is that of a “Tobin tax” (Tobin 1978), which would tax financial transactions and thereby reduce volatility in international financial markets (Reddy 2005, Wollner 2014).

A second feature of the current global order that has been criticized from a perspective of justice is the “borrowing privilege”. As Pogge describes (e.g., 2008: chap. 4), the governments of countries can borrow on international financial markets, no matter whether they have democratic legitimacy or not. This means that rogue governments can finance themselves by incurring debts that future generations of citizens will have to repay.

Sovereign debt raises a number of questions that are related to global justice. Usually, the contracts on which they are based are considered as absolutely binding (e.g., Suttle 2016), which can threaten national sovereignty (Dietsch 2011), and raises questions of the moral and political responsibilities both of citizens of debtor nations, and of creditor countries themselves (Wiedenbrüg, 2018a, 2018b). These problems obtain in particular with regard to what has been called “odious” debt (Sack 1927, Howse 2007, Dimitriu 2015, King 2016): cases in which government officials sign debt contracts in order to enrich themselves, with lenders being aware of this fact. Such cases have been at the center of calls for a jubilee for indebted nations. At the moment, there are no binding international rules for how to deal with sovereign bankruptcy, and countries in financial distress have no systematic possibility of making their claims heard, which is problematic from a perspective of justice (e.g., Palley 2003; Reddy 2005: 26–33; Herman 2007; C. Barry & Tomitova 2007; Wollner 2018). The IMF, which often supports countries in restructuring sovereign debt, has often made this support conditional upon certain requirements about rearranging the economic structures of a country (for a discussion of the permissibility of such practices see C. Barry 2011).

Finally, and perhaps most importantly, the issue of financial regulation has a global dimension in the sense that capital is mobile across national boundaries, creating the threats to democracy described above. This fact makes it difficult for individual countries, especially smaller ones, to install the more rigid financial regulations that would be required from a perspective of justice. Just as with many other questions of global justice (see, e.g., Dietsch 2015 on taxation), we seem to see a failure of coordination between countries, which leads to a “race to the bottom”. Making global financial institutions more just is therefore likely to require significant levels of international cooperation.

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Library of Congress Catalog Data: ISSN 1095-5054

The Influence of Attitude to Money on Individuals’ Financial Well-Being

• Original Research
• Published: 04 March 2020
• Volume 148 , pages 747–764, ( 2020 )

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• Sandra Castro-González 1 ,
• Sara Fernández-López 2 ,
• Lucía Rey-Ares 3 &
• David Rodeiro-Pazos   ORCID: orcid.org/0000-0002-5272-2676 2  

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Individuals’ financial well-being has been recognised as an important concern to reach individuals’ general well-being and societal welfare. In this context, understanding how individuals can ensure a good state of financial well-being is a critical question. However, previous studies have not paid enough attention to underlying the mechanisms by which individuals achieve financial well-being. The purpose of this paper is to explore the influence of attitude to money on individuals’ financial well-being, placing the emphasis on the intervention of financial planning horizon, risk tolerance and individuals’ actual financial behaviour. Using Structural Equation Modelling and Process Procedure for SPSS, empirical evidence for a sample of 8554 Spanish individuals largely supports the proposed hypotheses. Indeed, it suggests that individuals’ attitude to money influences actual financial behaviour, besides planning horizon and risk tolerance, that both exert an influence over actual financial behaviour, and this, ultimately, influences individuals’ financial well-being. This study ends up by presenting the main implications of these findings.

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Department of Business Organization and Commercialisation. Faculty of Business Administration, Universidade de Santiago de Compostela, Avda. Alfonso X El Sabio, s/n, 27002, Lugo, Galicia, Spain

Sandra Castro-González

Department of Financial Economics and Accounting. Faculty of Economics and Business, Universidade de Santiago de Compostela, Avda. do Burgo, s/n, 15782, Santiago de Compostela, Galicia, Spain

Sara Fernández-López & David Rodeiro-Pazos

Business Department. Faculty of Humanities and Documentation, Universidade da Coruña, Campus de Esteiro, s/n, Ferrol, 15403, Galicia, Spain

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Castro-González, S., Fernández-López, S., Rey-Ares, L. et al. The Influence of Attitude to Money on Individuals’ Financial Well-Being. Soc Indic Res 148 , 747–764 (2020). https://doi.org/10.1007/s11205-019-02219-4

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Best Analysis: Money and Materialism in The Great Gatsby

Book Guides

In The Great Gatsby , money is a huge motivator in the characters' relationships, motivations, and outcomes. Most of the characters reveal themselves to be highly materialistic, their motivations driven by their desire for money and things: Daisy marries and stays with Tom because of the lifestyle he can provide her, Myrtle has her affair with Tom due to the privileged world it grants her access to, and Gatsby even lusts after Daisy as if she is a prize to be won. After all, her voice is "full of money—that was the inexhaustible charm that rose and fell in it, the jingle of it, the cymbals' song of it. . . . High in a white palace the king's daughter, the golden girl. . . ." (7.106).

So how exactly does materialism reveal itself as a theme, how can it help us analyze the characters, and what are some common assignments surrounding this theme? We will dig into all things money here in this guide.

Money and materialism in the plot Key quotes about money/materialism Analyzing characters via money/materialism Common assignments and analysis of money/materialism in Gatsby

Quick Note on Our Citations

Our citation format in this guide is (chapter.paragraph). We're using this system since there are many editions of Gatsby , so using page numbers would only work for students with our copy of the book.

To find a quotation we cite via chapter and paragraph in your book, you can either eyeball it (Paragraph 1-50: beginning of chapter; 50-100: middle of chapter; 100-on: end of chapter), or use the search function if you're using an online or eReader version of the text.

Money and Materialism in The Great Gatsby

In the opening pages, Nick establishes himself as someone who has had many advantages in life —a wealthy family and an Ivy League education to name just two. Despite not being as wealthy as Tom and Daisy, his second cousin, they see him as enough of a peer to invite him to their home in Chapter 1 . Nick's connection to Daisy in turn makes him attractive to Gatsby. If Nick were just a middle-class everyman, the story could not play out in the same way.

Tom and Daisy 's movements are also supported by their money. At the beginning of the novel they move to fashionable East Egg, after moving around between "wherever people played polo and were rich together," and are able to very quickly pick up and leave at the end of the book after the murders, thanks to the protection their money provides (1.17). Daisy, for her part, only begins her affair with Gatsby after a very detailed display of his wealth (via the mansion tour). She even breaks down in tears after Gatsby shows off his ridiculously expensive set of colored shirts, crying that she's "never seen such beautiful shirts" before (5.118).

Gatsby 's notoriety comes from, first and foremost, his enormous wealth , wealth he has gathered to win over Daisy. Gatsby was born to poor farmer parents in North Dakota, but at 17, determined to become rich, struck out with the wealthy Dan Cody and never looked back (6.5-15). Even though he wasn't able to inherit any part of Cody's fortune, he used what he learned of wealthy society to first charm Daisy before shipping out to WWI. (In a uniform she had no idea he was poor, especially given his sophisticated manners). Then, after returning home and realizing Daisy was married and gone, he set out to earn enough money to win Daisy over, turning to crime via a partnership with Meyer Wolfshiem to quickly amass wealth (9.83-7).

Meanwhile, Tom's mistress Myrtle , a car mechanic's wife, puts on airs and tries to pass as rich through her affair with Tom, but her involvement with the Buchanans gets her killed. George Wilson , in contrast, is constrained by his lack of wealth. He tells Tom Buchanan after finding out about Myrtle's affair that he plans to move her West, but he "[needs] money pretty bad" in order to make the move (7.146). Tragically, Myrtle is hit and killed that evening by Daisy. If George Wilson had had the means, he likely would have already left New York with Myrtle in tow, saving both of their lives.

Hardly anyone shows up to Gatsby's funeral since they were only attracted by his wealth and the parties, not the man himself. This is encapsulated in a phone call Nick describes, to a man who used to come to Gatsby's parties: "one gentleman to whom I telephoned implied that he had got what he deserved. However, that was my fault, for he was one of those who used to sneer most bitterly at Gatsby on the courage of Gatsby's liquor and I should have known better than to call him" (9.69).

In short, money both drives the plot and explains many of the characters' motivations and limitations.

Key Quotes About Money

Then wear the gold hat, if that will move her; If you can bounce high, bounce for her too, Till she cry "Lover, gold-hatted, high-bouncing lover, I must have you!"

—THOMAS PARKE D'INVILLIERS

The epigraph of the novel immediately marks money and materialism as a key theme of the book—the listener is implored to "wear the gold hat" as a way to impress his lover. In other words, wealth is presented as the key to love—such an important key that the word "gold" is repeated twice. It's not enough to "bounce high" for someone, to win them over with your charm. You need wealth, the more the better, to win over the object of your desire.

"They had spent a year in France, for no particular reason, and then drifted here and there unrestfully wherever people played polo and were rich together." (1.17)

Our introduction to Tom and Daisy immediately describes them as rich, bored, and privileged. Tom's restlessness is likely one motivator for his affairs, while Daisy is weighed down by the knowledge of those affairs. This combination of restlessness and resentment puts them on the path to the tragedy at the end of the book.

"There was music from my neighbor's house through the summer nights. In his blue gardens men and girls came and went like moths among the whisperings and the champagne and the stars. At high tide in the afternoon I watched his guests diving from the tower of his raft or taking the sun on the hot sand of his beach while his two motor-boats slit the waters of the Sound, drawing aquaplanes over cataracts of foam. On week-ends his Rolls-Royce became an omnibus, bearing parties to and from the city, between nine in the morning and long past midnight, while his station wagon scampered like a brisk yellow bug to meet all trains. And on Mondays eight servants including an extra gardener toiled all day with mops and scrubbing-brushes and hammers and garden-shears, repairing the ravages of the night before…." (3.1-3.6)

The description of Gatsby's parties at the beginning of Chapter 3 is long and incredibly detailed, and thus it highlights the extraordinary extent of Gatsby's wealth and materialism. In contrast to Tom and Daisy's expensive but not overly gaudy mansion , and the small dinner party Nick attends there in Chapter 1 , everything about Gatsby's new wealth is over-the-top and showy, from the crates of oranges brought in and juiced one-by-one by a butler to the full orchestra.

Everyone who comes to the parties is attracted by Gatsby's money and wealth, making the culture of money-worship a society-wide trend in the novel, not just something our main characters fall victim to. After all, "People were not invited—they went there" (3.7). No one comes due to close personal friendship with Jay. Everyone is there for the spectacle alone.

He took out a pile of shirts and began throwing them, one by one before us, shirts of sheer linen and thick silk and fine flannel which lost their folds as they fell and covered the table in many-colored disarray. While we admired he brought more and the soft rich heap mounted higher—shirts with stripes and scrolls and plaids in coral and apple-green and lavender and faint orange with monograms of Indian blue. Suddenly with a strained sound, Daisy bent her head into the shirts and began to cry stormily.

"They're such beautiful shirts," she sobbed, her voice muffled in the thick folds. "It makes me sad because I've never seen such—such beautiful shirts before." (5.117-118)

Gatsby, like a peacock showing off its many-colored tail, flaunts his wealth to Daisy by showing off his many-colored shirts. And, fascinatingly, this is the first moment of the day Daisy fully breaks down emotionally—not when she first sees Gatsby, not after their first long conversation, not even at the initial sight of the mansion—but at this extremely conspicuous display of wealth. This speaks to her materialism and how, in her world, a certain amount of wealth is a barrier to entry for a relationship (friendship or more).

"She's got an indiscreet voice," I remarked. "It's full of——"

I hesitated.

"Her voice is full of money," he said suddenly.

That was it. I'd never understood before. It was full of money—that was the inexhaustible charm that rose and fell in it, the jingle of it, the cymbals' song of it. . . . High in a white palace the king's daughter, the golden girl. . . . (7.103-106)

Daisy herself is explicitly connected with money here, which allows the reader to see Gatsby's desire for her as desire for wealth, money, and status more generally. So while Daisy is materialistic and is drawn to Gatsby again due to his newly-acquired wealth, we see Gatsby is drawn to her as well due to the money and status she represents.

I couldn't forgive him or like him but I saw that what he had done was, to him, entirely justified. It was all very careless and confused. They were careless people, Tom and Daisy—they smashed up things and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made. . . . (9.146)

Here, in the aftermath of the novel's carnage, Nick observes that while Myrtle, George, and Gatsby have all died, Tom and Daisy are not punished at all for their recklessness, they can simply retreat "back into their money or their vast carelessness… and let other people clean up the mess." So money here is more than just status—it's a shield against responsibility, which allows Tom and Daisy to behave recklessly while other characters suffer and die in pursuit of their dreams.

Analyzing Characters Through Materialism

We touched on this a bit with the quotes, but all of the characters can be analyzed from the point of view of their wealth and/or how materialistic they are. This analysis can enrich an essay about old money versus new money, the American dream , or even a more straightforward character analysis , or a comparison of two different characters . Mining the text for a character's attitude toward money can be a very helpful way to understand their motivations in the world of 1920s New York.

If you analyze a character through this theme, make sure to explain:

#1 : Their attitude towards money.

#2 : How money/materialism drives their choices in the novel.

#3 : How their final outcome is shaped by their wealth status and what that says about their place in the world.

Character Analysis Example

As an example, let's look briefly at Myrtle . We get our best look at Myrtle in Chapter 2 , when Tom takes Nick to see her in Queens and they end up going to the New York City apartment Tom keeps for Myrtle and hosting a small gathering (after Tom and Myrtle hook up, with Nick in the next room!).

Myrtle is obsessed with shows of wealth , from her outfits, to insisting on a specific cab, to her apartment's decoration, complete with scenes of Versailles on the overly-large furniture: "The living room was crowded to the doors with a set of tapestried furniture entirely too large for it so that to move about was to stumble continually over scenes of ladies swinging in the gardens of Versailles" (2.51). She even adopts a different persona among her guests : "The intense vitality that had been so remarkable in the garage was converted into impressive hauteur. Her laughter, her gestures, her assertions became more violently affected moment by moment and as she expanded the room grew smaller around her until she seemed to be revolving on a noisy, creaking pivot through the smoky air" (2.56).

In Myrtle's eyes, money is an escape from life with her husband in the valley of ashes , something that brings status, and something that buys class. After all, Tom's money secures her fancy apartment and allows her to lord it over her guests and play at sophistication, even while Nick looks down his nose at her.

Obviously there is physical chemistry driving her affair with Tom, but she seems to get as much (if not more) pleasure from the materials that come with the affair—the apartment, the clothes, the dog, the parties. So she keeps up this affair, despite how morally questionable it is and the risk it opens up for her—her materialism, in other words, is her primary motivator.

However, despite her airs, she matters very little to the "old money" crowd, as cruelly evidenced first when Tom breaks her nose with a "short deft movement" (2.126), and later, when Daisy chooses to run her over rather than get into a car accident. Myrtle's character reveals how precarious social climbing is, how materialism is not actually a path to happiness/virtue.

Common Assignments and Discussion Topics About Money and Materialism in The Great Gatsby

Here are ways to think about frequently assigned topics on this the theme of money and materialism.

Discuss Tom & Daisy as people who "smash things and retreat into their money"

As discussed above, money—and specifically having inherited money—not only guarantees a certain social class, it guarantees safety and privilege : Tom and Daisy can literally live by different rules than other, less-wealthy people. While Gatsby, Myrtle, and George all end up dead, Tom and Daisy get to skip town and avoid any consequences, despite their direct involvement.

For this prompt, you can explore earlier examples of Tom's carelessness (breaking Myrtle's nose, his behavior in the hotel scene, letting Daisy and Gatsby drive back to Long Island after the fight in the hotel) as well as Daisy's (throwing a fit just before her wedding but going through with it, kissing Gatsby with her husband in the next room). Show how each instance reveals Tom or Daisy's carelessness, and how those instances thus foreshadow the bigger tragedy—Myrtle's death at Daisy's hands, followed by Tom's manipulation of George to kill Gatsby.

You can also compare Tom and Daisy's actions and outcomes to other characters to help make your point—Myrtle and Gatsby both contribute to the conflict by participating in affairs with Tom and Daisy, but obviously, Myrtle and Gatsby don't get to "retreat into their money," they both end up dead. Clearly, having old money sets you far apart from everyone else in the world of the novel.

What do Nick's comments about money reveal about his attitude towards wealth?

This is an interesting prompt, since you have to comb through passages of Nick's narration to find his comments about money, and then consider what they could mean, given that he comes from money himself.

To get you started, here is a sample of some of Nick's comments on money and the wealthy, though there are certainly more to be found:

"Only Gatsby, the man who gives his name to this book, was exempt from my reaction—Gatsby who represented everything for which I have an unaffected scorn." (1.4)

"My own house was an eye-sore, but it was a small eye-sore, and it had been overlooked, so I had a view of the water, a partial view of my neighbor's lawn, and the consoling proximity of millionaires—all for eighty dollars a month. (1.14)

Nick's comments about money, especially in the first chapter, are mostly critical and cynical. First of all, he makes it clear that he has "an unaffected scorn" for the ultra-rich, and eyes both new money and old money critically. He sarcastically describes the "consoling proximity of millionaires" on West Egg and wryly observes Tom and Daisy's restless entitlement on East Egg.

These comments might seem a bit odd, given that Nick admits to coming from money himself: "My family have been prominent, well-to-do people in this middle-western city for three generations" (1.5). However, while Nick is wealthy, he is nowhere near as wealthy as the Buchanans or Gatsby—he expresses surprise both that Tom is able to afford bringing ponies from Lake Forest ("It was hard to realize that a man in my own generation was wealthy enough to do that" (1.16), and that Gatsby was able to buy his own mansion ("But young men didn't—at least in my provincial inexperience I believed they didn't—drift coolly out of nowhere and buy a palace on Long Island Sound" (3.88)), despite the fact they are all about 30 years old.

In other words, while he opens the book with his father's advice to remember "all the advantages [he's] had," Nick seems to have a chip on his shoulder about still not being in the highest tier of the wealthy class . While he can observe the social movements of the wealthy with razor precision, he always comes off as wry, detached, and perhaps even bitter. Perhaps this attitude was tempered at Yale, where he would have been surrounded by other ultra-wealthy peers, but in any case, Nick's cynical, sarcastic attitude seems to be a cover for jealousy and resentment for those even more wealthy than him.

Why does Gatsby say Daisy's voice is "full of money"? What does it reveal about the characters' values?

Gatsby's comment about Daisy's voice explicitly connects Daisy the character to the promise of wealth, old money, and even the American Dream . Furthermore, the rest of that quote explicitly describes Daisy as "High in a white palace, the King's daughter, the golden girl…" (7.106). This makes Daisy sound like the princess that the hero gets to marry at the end of a fairy tale—in other words, she's a high-value prize .

Daisy representing money also suggests money is as alluring and desirable—or even more so—than Daisy herself. In fact, during Chapter 8 when we finally get a fuller recap of Daisy and Gatsby's early relationship, Nick notes that "It excited [Gatsby] too that many men had already loved Daisy—it increased her value in his eyes" (8.10). In other words, Gatsby loves Daisy's "value" as an in-demand product .

But since Daisy is flighty and inconsistent, Gatsby's comment also suggests that wealth is similarly unstable. But that knowledge doesn't dampen his pursuit of wealth—if anything, it makes it even more desirable. And since Gatsby doesn't give up his dream, even into death, we can see how fervently he desires money and status.

Connecting new/old money and materialism to the American dream

In the world of The Great Gatsby , the American Dream is synonymous with money and status —not so much success, career (does anyone but Nick and George even have a real job?), happiness, or family. But even Gatsby, who makes an incredible amount of money in a short time, is not allowed access into the upper echelon of society, and loses everything in trying to climb that final, precarious rung of the ladder, as represented by Daisy.

So the American Dream, which in the first half of the book seems attainable based on Gatsby's wealth and success, reveals itself to be a hollow goal. After all, if even wealth on the scale of Gatsby's can't buy you entry into America's highest social class, what can? What's the point of striving so hard if only heartbreak and death are waiting at the end of the road?

This pessimism is also reflected in the fates of Myrtle and George, who are both trying to increase their wealth and status in America, but end up dead by the end of the novel. You can read more about the American Dream for details on The Great Gatsby 's ultimately skeptical, cynical attitude towards this classic American ideal.

Connecting money to the status of women

Daisy and Jordan are both old money socialites, while Myrtle is a working class woman married to a mechanic. You can thus compare three very different women's experiences to explore how money—or a lack thereof—seems to change the possibilities in a woman's life in early 1920s America.

Daisy maintains her "old money" status by marrying a very rich man, Tom Buchanan, and ultimately sticks with him despite her feelings for Gatsby. Daisy's decision illustrates how few choices many women had during that time—specifically, that marrying and having children was seen as the main role any woman, but especially a wealthy woman, should fulfill. And furthermore, Daisy's willingness to stay with Tom despite his affairs underscores another aspect of women's roles during the 1920s: that divorce was still very uncommon and controversial.

Jordan temporarily flouts expectations by ""[running] around the country," (1.134) playing golf, and not being in a hurry to marry—a freedom that she is allowed because of her money, not in spite of it. Furthermore, she banks on her place as a wealthy woman to avoid any major scrutiny, despite her "incurable dishonesty": "Jordan Baker instinctively avoided clever shrewd men and now I saw that this was because she felt safer on a plane where any divergence from a code would be thought impossible. She was incurably dishonest. She wasn't able to endure being at a disadvantage, and given this unwillingness I suppose she had begun dealing in subterfuges when she was very young" (3.160). Furthermore, by the end of the novel she claims to be engaged, meaning that like Daisy, she's ultimately chosen to live within the lines society has given her. (Even if she's not actually engaged, the fact she chooses to tell Nick that suggests she does see engagement as her end goal in life.)

Myrtle feels trapped in her marriage, which pushes her into her affair with Tom Buchanan, an affair which grants her access to a world—New York City, wealth, parties—she might not otherwise have access to. However, jumping up beyond her roots, using Tom's money, is ultimately unsustainable—her husband finds out and threatens to move out west, and then of course she is killed by Daisy before they can make that move. Myrtle—both working class and a woman—is thus trapped between a rock (her gender) and a hard place (her lack of money), and perhaps for this reason receives the cruelest treatment of all.

So all three women push the boundaries of their expected societal roles—Daisy's affair with Gatsby, Jordan's independent lifestyle, and Myrtle's affair with Tom—but ultimately either fall in line (Daisy, Jordan) or are killed for reaching too far (Myrtle). So Gatsby ultimately provides a pretty harsh, pessimistic view of women's roles in 1920s America.

What's Next?

In The Great Gatsby, money is central to the idea of the American Dream. Read more about how the American Dream is treated in The Great Gatsby and whether the novel is ultimately optimistic or pessimistic about the dream.

Money (or the lack of it!) is also why the novel's symbols of the green light and the valley of ashes are so memorable and charged. Read more about those symbols for a fuller understanding of how money affects The Great Gatsby.

Want the complete lowdown on Jay Gatsby's rags-to-riches story? Check out our guide to Jay Gatsby for the complete story.

Thinking about indulging in a little materialism yourself alà Gatsby? We've compiled a list of 15 must-have items for fans of The Great Gatbsy book and movie adaptations .

Looking for other literary guides? Learn more about The Crucible , The Cask of Amontillado , and " Do not go gentle into that good night " with our expert analyses.

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• Aug 22, 2019

Different Attitudes Towards Money

Updated: Oct 15, 2020

Money and happiness have a tricky relationship.

What makes you happy, and how money leads to happiness for you, are personal questions.

By exploring what our unique motivations and tendencies are with money, we can better understand how to improve them, and how to use them to our advantage.

How we feel about and think about money, and what we tend to do because of it, is affected by our different attitudes towards money.

Different attitudes towards money affects your answer to questions like:

1. How do you use money in your relationships with friends, family, partners, etc.?

2. How do you use money when you're feeling stressed?

3. How do you use money when you're feeling confident?

4. How do you like to spend your free time?

5. How do you spend disposable income?

6. What kind of jobs do you prefer?

These answers are different for everyone, but there are some common themes that can effectively be bunched into different groups.

These are the 4 Money Personality Types.

These 4 Money Personalities can tell you great deal about your relationship to money, the strengths you are armed with, and the challenges you often face.

What is your Money Personality?

Understanding your Money Personality is like finding yourself on a map.

Without knowing where you are, how can you get to where you want to go next?

Knowing your Money Personality empowers you to be honest about your habits, beliefs, and motivations around money, allowing you to be more effective at earning, saving, and investing.

Take this 4 minute Money Personality Quiz to Discover your Money Personality!

After you've taken your test, we'll email you the results with a FREE GUIDE: Understanding Your Money Personality: A Guide for Discussing Money With Your Children.

This guide provides an in depth explanation into understanding:

1. What does your Money Personality mean for you?

2. How does your Money Personality show up in your life?

3. What you can do to improve your Money Personality?

Take a free Money Personality Test to find out your type.

To learn more about how our different attitudes towards money affects our personal finances, check out Money Club -- online games, community, and classes to learn about money and finance !

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• Published: 28 January 2019

Culture, money attitudes and economic outcomes

• Caroline Henchoz   ORCID: orcid.org/0000-0002-8489-7622 1 ,
• Tristan Coste 1 &
• Boris Wernli 2  

Swiss Journal of Economics and Statistics volume  155 , Article number:  2 ( 2019 ) Cite this article

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Using novel survey data, we examine attitudes towards money and to what extent they affect economic outcomes in Switzerland. We find that three main types of attitudes towards money co-exist: the prestige and power attitude, the money management attitude and the goal-oriented attitude. The distribution of these attitudes differs across Switzerland’s linguistic regions; all of them are more significant in the French-speaking part, compared to the German- and Italian-speaking parts of Switzerland.

Attitudes towards money shape financial behaviour, but the relationship varies depending on the type of financial behaviour. Culturally shaped attitudes to money are mostly linked with indebtedness; a finding that could help design better financial literacy programmes.

1 Introduction

In recent years, new data and techniques have made it possible to study the effects of culture, ‘those customary beliefs and values that ethnic, religious, and social groups transmit fairly unchanged from generation to generation’, on individual financial practices (Guiso, Sapienza, and Zingales, 2006 , p. 23). A growing literature documents differences in financial decisions taken by individual members of cultural groups. In a study of 80,000 individuals from 76 countries around the world, Falk et al. ( 2015 ) address national cultures with regard to preferences relating to risk and time that influence a wide range of individual-level behaviours including savings and labour market choices (see also Carroll, Rhee, and Rhee, 1994 , 1999 ). National culture also affects individual behaviours related to indebtedness and mortgages (Guiso, Sapienza, and Zingales, 2013 ) and to shopping behaviours (Gentina, Butori, Rose, and Bakir, 2013 ; Parker, Hermans, and Schaefer, 2008 ) or individual financial market investment behaviours (Chui, Titman, and Wei, 2010 ; Eun, Wang, and Xiao, 2015 ; Grinblatt and Keloharju, 2001 ; Guiso, Sapienza, and Zingales, 2008 ).

‘It is therefore likely that culture influences business and financial decisions’ (Aggarwal, Faccio, Guedhami, and Kwok, 2016 , p. 1), but it is nevertheless more difficult to know whether this influence is linked to different cultural attitudes towards money or the institutional, legal, political and social context specific to each country. Only a few, and recent, studies demonstrate the existence of different cultural attitudes towards money in a single national context (Medina, Saegert, and Gresham, 1996 ; Tang, Arocas, and Whiteside, 1997 ). As Kahneman, awarded the Nobel Prize in Economic Sciences in 2002, stated: ‘much remains to be learned about the ‘endowment effect’’ of cultural differences in attitude towards money (Kahneman, 2011 : 299). Little is yet known about the way in which cultural differences in attitude towards money affect economic outcomes (Mitchell and Mickel, 1999 ; Tang et al. 2015 ).

In this study, we document the link between cultural differences in attitude towards money and their potential impact on individual financial behaviours. Our analysis is based on an online survey of a representative sample of 1390 men and women aged between 18 and 30 years from Switzerland’s three main linguistic regions (German, French and Italian). We begin by documenting the existence of the different attitudes towards money among our sample of the Swiss population and test how these are linked to the different linguistic regions. We then examine the extent to which these attitudes affect economic outcomes. This approach has the advantage of testing both the existence of a cultural relationship with money, and the possible influence of this relationship on individual financial behaviours.

Our research contributes to the literature on the meanings of money. As a number of scholars have argued, ‘research on money, specifically, money as an individual difference variable—has been neglected’ (Mitchell and Mickel, 1999 , p. 568). We demonstrate that while a large majority of our population perceives money as a means to be autonomous, different money attitudes can co-exist even within a single national context. We distinguish three main types of attitude towards money: the prestige and power attitude, the money management attitude and the goal-oriented attitude. Our results confirm, as do other studies conducted in Switzerland (Brown, Henchoz, and Spycher, 2018 ), that different attitudes towards money indeed exist depending on the linguistic region (German, French or Italian). We show that the distribution of these three main attitudes differs across Switzerland’s linguistic regions; all of the attitudes are adhered to more strongly by the survey respondents from the French-speaking region, compared to the German- and Italian-speaking regions of Switzerland. We thus confirm that an understanding of cultural differences through language—an approach taken in other research (Eugster, Lalive, Steinhauer, and Zweimueller, 2017 ; Eugster, Lalive, Steinhauer, and Zweimüller, 2011 ; Eugster and Parchet, 2013 )—is a pertinent one. Our study also contributes to the culture and finance literature by linking culture and economic outcomes. It identifies a relation between cultural attitudes towards money and financial practices. This relation must, however, be put into perspective. On the one hand, it varies depending on the type of practice in question. Our results show that the cultural attitudes towards money are linked, above all, to indebtedness. The link appears minimal regarding savings. On the other hand, only certain attitudes can be related to indebtedness. It is mainly when money is considered as a means to obtain prestige and power that the relation to the presence and type of debts becomes evident. Consequently, this study may also be highly relevant for policy-makers, notably with a view to applying financial literacy programmes more effectively. It concerns what Brown, Henchoz, and Spycher ( 2018 ) observed, i.e. the importance of developing financial education programmes that focus not only on improving financial skills and encouraging forward-looking behaviour, but also that integrate different predispositions within the target group; notably money attitudes.

2 Swiss culture and economic outcomes

Several studies on Switzerland demonstrate that there is a clear distinction between the linguistic groups in terms of work attitudes, voting behaviour, demand for social insurance, taxation or financial practices (Eugster et al. 2017 ; Eugster et al. 2011 ; Eugster and Parchet, 2013 ; Guin, 2017 ). Guin ( 2017 ) shows, for example, that considerable differences exist in behaviour associated with savings and indebtedness. Households in French-speaking regions save less than those in the German-speaking regions, and are more likely to take out formal credits and informal ones (among the family network, for example) in the case of financial difficulties and overdue payments. This is confirmed by the Federal Statistical Office (FSO); households in the French-speaking regions are ahead of the Italian- and German-speaking Swiss in terms of indebtedness. Footnote 1 Moreover, debts owed to the family or to friends are more common among the French-speaking Swiss than German speakers. Footnote 2 The same tendency can be found among people aged 18–30 years. The existing literature suggests that French-speaking students save less (Guin, 2017 ). German-speaking people who leave the parental home have larger incomes, have fewer financial difficulties, save more and have fewer overdue payments than those in the other regions of the country (Wernli and Henchoz, 2015 ).

Two main theories have been advanced by economists to explain the origin of these cultural differences and their impact on financial practices. The first concerns different conceptions of the state. The more liberal vision of the state on the part of the German-speaking Swiss (Eugster et al. 2011 ; Eugster and Parchet, 2013 ) Footnote 3 appears to lead them to rely on their own resources to a greater extent and thus to lend more importance to individual savings (Guin, 2017 ). The other theory relates to time preferences. The French-speaking Swiss, who are less patient (Guin, 2017 ), appear to be less prepared to wait and to delay their consumer choices until later. That could notably be explained via the syntax of the language (Chen, 2013 ; Sutter, Kocher, Glätzle-Rüetzler, and Trautmann, 2013 ); speakers of languages favouring the use of the future tense, as is the case for French, tend to be less patient than speakers of languages that make little use of the future tense, such as German.

These studies often use non-financial indicators—such as, in Switzerland, voting results (Eugster et al. 2011 ) or the consumption of cigarettes (Guin, 2017 )—to explain different cultural behaviours (see also Aggarwal et al. 2016 , pp. 3–4).

We do not have a great deal of information on cultural attitudes towards money in Switzerland. In a recent study comparing students aged 15 in a narrow geographic region along the German–French language border within the Swiss Canton of Fribourg, Brown et al. ( 2018 ) focused on certain items that we have developed in our study. They observed that French-speaking students connect money more strongly with freedom. However, they note that the lower level of financial literacy on the part of the French-speaking Swiss than that of their German-speaking counterparts could be explained more by their lower level of financial socialisation (e.g. they have less pocket money or are less likely to have an own bank account) then by different cultural attitudes towards money.

3 Data and methodology

Our analysis is based on an online survey elaborated within the framework of sociological research funded by the Swiss National Science Foundation. This research uses a mixed-methods approach to study financial socialisation among young people in Switzerland. Footnote 4 The objective of the online survey was to consolidate and generalise the hypotheses established in the qualitative phase (Bühlmann and Tettamanti, 2007 ; see also Creswell, 2009 ). It had three major themes: (i) attitudes and values linked to money; (ii) financial practices (savings, management of money and consumption); (iii) indebtedness (type, extent and reasons for the debts). It was based on a raw sample of 5000 persons aged between 18 and 30 years residing in Switzerland. Footnote 5 The sample was taken at random among the three linguistic regions (German, French and Italian) Footnote 6 with an intended over-weighting of those from the Italian-speaking region (10%).

The survey was held from May to July 2015, with contact by post (a first mailing and one reminder), inviting the respondents to complete an online questionnaire. Footnote 7 We obtained a response rate of 28% (15% with the first mailing), which represented 1390 completed questionnaires. Footnote 8 The quality of the responses was particularly high, because the dropout rate was only 1% (50 questionnaires) and the item ‘nonresponse’ was virtually non-existent for all the 1390 questionnaires completed. Because of their convenient format and their interactivity, a key advantage of web surveys is precisely their ability to produce high-quality data (Schaefer and Dillman, 1998 ).

3.1 Items measuring the components of attitudes towards money

The most popular scale to measure money attitudes is Tang’s Money Ethical Scale (MES), which has been used in over 50 countries (Tang, Furnham, and Davis, 2003 , p. 177). Depending on the version, it has between 12 and 30 items that evaluate three components of the MES; the affective component (good and bad), the behavioural component (budget) and the cognitive component (accomplishment, respect and power) (Tang, Furnham, and Davis, 2002 ; Tang et al. 2003 ). It has above all been used to determine the extent to which the cultural meaning of money had an impact on work-related attitudes, e.g. job and pay satisfaction (Tang et al. 2002 , 2003 ) and consumer practices (Vitell, Paolillo, and Singh, 2006 ; Vitell, Singh, and Paolillo, 2007 ).

We have not used this scale in full in our questionnaire for two main reasons. First, it cannot test the explanatory hypotheses arising from the qualitative part of the research in a satisfactory way. Second, we consider that it has the disadvantage of mixing attachment to certain values associated with money and the evaluation of one’s own financial behaviour. Consequently, we retained the cognitive component of the MES (see Table  1 , questions 1–4). To these, we have added two other attributes associated with money and that are the result of sociology studies on the social meaning of money (Lamont, 1992 ; Zelizer, 2005 ) (question 5) and research on materialism (Richins, 2004 ; Richins and Dawson, 1992 ) (question 6).

We also retained the behavioural component of the MES (questions 7–10). In our survey, this second group of instruments measuring attitudes towards money is related to parental transmissions associated with the uses of money, i.e. the values that have been transmitted regarding the appropriate way of using one’s financial resources. We considered it important to evaluate the money attitudes learned through the socialisation process established in childhood and that relate to ways of acting, because it has been demonstrated that these aspects influence adult behaviour (Argyle and Furnham, 1998 ; Furnham, Kirkcaldy, and Lynn, 1994 ). Moreover, parents are considered to play a decisive role in teaching attitudes towards money (Beutler and Dickson, 2008 ).

3.2 Organisation of the article, hypotheses and methods

In the first part of the analysis, we describe the distribution of the responses related to the cognitive and behavioural component of attitudes towards money among our respondents. We base this on the hypothesis, taken from the qualitative exploratory study by Dell’Orto and Doyle (2001) on ‘Meanings of money in Italy and in Switzerland’. According to this study, Swiss people have an analytical relation with money, unlike Italians, who exhibit the ‘expressive’ trait, spending money freely for themselves and for friends and ‘using wealth to judge worth, linking money, or the lack of it, to potency, compassion, ethics. [While] the Swiss shun […] money as inappropriate, thus restricting its emotional value’ (Dell’Orto and Doyle, 2001 , p. 260). According to these authors, the Swiss personify the ‘analytic’ and ‘driver’ types; they rank ‘save’ or ‘invest’ the highest. Money is understood as an end in itself rather than as a means. On this basis, we could expect that the majority of our respondents would attribute a low score to the cognitive attributes associated with money (items 1–5) except where money is seen to be a purpose in itself (item 6), which should obtain a high score. This also applies to the behavioural component related to money. Behaviours associated with savings, management of money and solvency (items 8–10) should obtain a higher score than the item related to pleasure (item 7).

In the second part, we identify the main attitudes towards money in Switzerland. According to Tang ( 1992 , p. 201), people’s attitudes towards money can be defined ‘as their ‘frame of reference’ in which they examine their everyday lives’ and that they use to take the related financial decisions. To identify ‘frames of reference’, we use principal component analysis (PCA). Footnote 9 PCA allows us to select the components of attitudes towards money from the first part of the study which have the highest correlations with the principal component, thus structuring the information collected from the respondents. By identifying latent factors, this technique (Kim and Mueller, 1978 ) reveals the structure subjacent to the indicators measured (Table  1 ) and permits representation along distinct axes. In order to retain only the principal components, which are the dimensions where there is the most variance in the dataset, we use the Kaiser criterion to remove all components with eigenvalues under 1.0, thus ignoring all the secondary eigenvectors. An orthogonal rotation is used to maximise the variance of the squared loadings of a factor and to decorrelate the extracted components. Finally, factor scores are calculated using a linear combination (least squares regression) of the items loading on each factor. Under this process, the computed factor scores are standardised to a mean of zero, with a standard deviation of 1.

In the third part, we tested the existence of different cultural attitudes towards money in Switzerland. According to literature cited previously, we supposed that there would be a link between the attitudes towards money shown in the second part and the language region. If that was the case, could we expect that the Italian-speaking Swiss would have an attitude closer to the Italian expressive trait highlighted by Dell’Orto and Doyle (2001) than that of the German and French-speaking Swiss?

A series of multilevel linear regressions (Hox, 2010 ) was used to model the positioning on the axis of continuous values that were identified after the PCA was carried out, according to a series of independent continuous or dichotomous variables. This method aims to test the hypothesis of a differentiated positioning on the value axes among our respondents depending on their socio-demographic characteristics. Multilevel models are needed in that case because data from the same Swiss canton are generally more similar to each other, due to the socio-economic, cultural and legal context, than data from different cantons, and this violates the assumption of independence of all observations made by the ‘classical’ ordinary least squares model. This kind of model can be expressed algebraically with the following linear multilevel equation (Eq.  1 ). Y ic refers to the score on the dependent variable for an individual (i) observed in his canton (c), x 1 ic to the first predictor (ranging from 1 to p) for an individual (i) observed in his canton (c), β 1 ((ranging from 1 to p) refers to the slope between the first predictor and the dependent variable, and γ 00 to the intercept of the dependent variable.

To take the non-independence of the observations inside the same canton into account, the residuals are subdivided into two parts. In addition to the varying error term for each observation (ε_ic), which is common to every regression equation, we add a second error term (μ_0c) that remains constant for all observations of the same canton. This approach allows us to structure the residuals and correlate them within cantons.

where  c  = canton and  i  = individual and where  u 0 c ~ N  (0,  τ u 0 ) and ε ic ~ N  (0,  τ e ).

In the fourth part, we study the association between money attitudes and outcomes, as measured by previous research (Carroll, Rhee and Rhee, 1994 , 1999 ; Khare, 2015 ; Roberts and Jones, 2001 ). We consider two economic outcomes: savings and debts. As we have seen in Section  2 , it is above all these two aspects of financial behaviour that have been used in research conducted in Switzerland to evaluate cultural differences. We model various different financial practices related to these behaviours, i.e. regular savings, having a debt, having overdue bills or having leasing contracts, using multilevel binary logistical regression analyses (Goldstein, 1991 ). This tool is appropriate because of the dichotomous character of our dependent variables; the explanatory factors could be either continuous or dichotomous variables, and take into account the existing correlation between data gathered in the same Swiss canton. Equation  2 looks similar to a ‘classical’ logistic regression model, with the inclusion of a supplementary term (μ_0c) which remains constant for all the observations of the same canton and allows us to make the intercept of our logit (β_00) vary for each canton.

where  c  = canton and  i  = individual and where  u 0 c ~ N  (0,  τ u 0 ).

4.1 Cognitive and behavioural attitudes towards money

Figure  1 partially confirms our hypotheses based on the exploratory study by Dell’Orto and Doyle (2001). In general, Swiss people do have a relation with money that can be qualified as analytical. Only 28% strongly agree or agree with the fact that money is a means to have power (item 4), 21% attribute a value of social recognition to money (item 2), and only 8% agree with the fact that money is a means to make friends (item 5). Nevertheless, and contrary to the results by Dell’Orto and Doyle (2001), money is rarely perceived as an end in itself. Only 9% of the respondents were partially or fully in agreement with the fact that it was something they were prepared to achieve by any means (item 6). The principal cognitive components of attitude towards money that emerge from the analysis can be brought together under the concept of autonomy; the majority of the respondents see money as freedom and achievement. For 79% respondents, money is seen as a means to do what they enjoy (47% agree partially and 32% agree strongly with this statement—item 3), and for 71%, money is a means to achieve objectives (51% are partially in agreement and 20% are strongly in agreement with this statement—item 1).

Cognitive component of money (distribution of responses in percent)

Figure  2 confirms the strong attachment to the behaviour of savings, balanced budgeting and solvency (items 8–10). The values transmitted by the parents aim to inculcate a certain degree of moderation and a ‘spirit of being economical’ that the sociologist Boltanski ( 1966 ) had already identified in the Swiss population of the 1960s. According to him, ‘Swiss virtues are fully expressed in the opposition between the serious and the futile—a dichotomy that is valid for all situations of existence’ (translation) (Boltanski, 1966 , p. 24). Even now, nearly 88% of respondents affirm that when they were children or adolescents, their parents often or very often told them that one should never spend more money than one has (item 9), 81% were told that it was necessary to put money aside (item 8), and 75% were told that one should never enter into debt (item 10). Conversely, using money for enjoyment is only mentioned by 19% (item 7).

Behavioural component of money (distribution of responses in percent)

4.2 Attitudes towards money in Switzerland

By distinguishing 3 out of the 10 indicators presented in Figs.  1 and 2 , the PCA confirms the hypothesis of the co-existence of different attitudes towards money in Switzerland. Footnote 10 These three main attitudes towards money can be defined as follows. The first money attitude identified (axis 1), the ‘prestige and power attitude’, is only defined by cognitive dimensions related to social connections, social prestige and power linked to money, which is consistent with the money attitude scale (Yamauchi and Templer, 1982 ). The axis of prestige–power is strongly linked to the items in line with this topic. The indicator of money as status and respect is correlated at 0.81; money as power is at 0.76, while the items related to money as an end in itself (0.57) and money as a social facilitator (0.55) are related to a lesser extent.

The second money attitude (axis 2), the ‘economical management attitude’, is only defined by the behavioural component, which seems to us to be associated with money management in accordance with the spirit of being economical and serious, already observed by Boltanski ( 1966 ). The items attached to balanced-type, solvency and savings-oriented behaviour are correlated to a more or less equal extent (0.82, 0.79 and 0.76, respectively) to axis 2.

The third money attitude identified (axis 3), the ‘goal-oriented attitude’, is a mix between cognitive and behavioural dimensions but all of them are goal-oriented. Axis 3 is associated with money as freedom (0.70); with money as an achievement (0.66) and with money as a means to enjoy oneself (hedonist behaviour) (0.60) (Table  2 ).

4.3 Cultural attitudes towards money

The results presented in Table  3 confirm the existence of different money attitudes in Switzerland depending on linguistic region. The linguistic region is the unique parameter that systematically and significantly influences the three value axes. Compared to the German-speaking Swiss, the French-speaking Swiss have higher scores on the prestige–power axis (0.28) Footnote 11 and on the goal-oriented axis (0.18). They also have higher scores on the economical management axis (0.18). The Italian-speaking Swiss have a lower score on the goal-oriented axis (− 0.56) than the German-speaking Swiss (which means that they cannot be associated with the Italian expressive type of Dell’Orto and Doyle, 2001). While this result confirms the hypothesis of the existence of cultural attitudes towards money, we do not find that each linguistic region has its own cultural attitude. We can interpret this result in light of the work of Polanyi ([ 1944 ] 1983). In the German- and Italian-speaking regions of Switzerland, attitudes towards money seem more disembedded from their social dimensions than in the French-speaking region. Prestige and power attitude, economical management attitude and goal-oriented attitude all received less support. The German- and Italian-speaking Swiss seem to grant fewer attributes to money than the French-speaking Swiss, as if money was more seen and perceived in its instrumental perspective.

The significant but less systematic impact of several other parameters should also be noted. The prestige–power attitude is more often adopted by men (0.28) than by women. One possible explanation can be found in the ‘breadwinner role’ that is assumed by the majority of men in Switzerland (Mosimann, 2016 ) and which implies that part of the social recognition they can expect is the result of their capacity to assume this role successfully (Henchoz, 2008 ). Foreigners (− 0.22 for the Swiss) are also more represented on the prestige–power axis, which tends to confirm the presence of cultural attitudes towards money. Higher scores on this axis are also shown by those with higher incomes (0.42 for revenues of CHF 7000 per month and above) and those who live with their two parents, while those living as a couple without children are less sensitive (− 0.24).

The economical management attitude towards money seems distributed throughout the population, since no variation emerged based on the variables examined, with one exception. More people with intermediate education clearly adhere to this attitude (0.26) than those with elementary or higher education. This result confirms a qualitative study carried out in the Canton of Fribourg on money uses and attitudes among apprentices and students of vocational high schools, universities of applied science and universities (Henchoz, 2013 a, 2013 b). The former appear to attach considerable importance to saving money. This is confirmed in the present study by the fact that individuals with intermediate-level education are less represented among the goal-oriented attitude.

4.4 Association between attitudes and outcomes

The results of the multilevel binary logistical regression analyses presented in Table  4 confirm our hypotheses; culturally different money attitudes can be related to different financial practices, but the link depends on the economic outcome examined.

No money attitude significantly influences the savings behaviours, Footnote 12 which confirms the results by Carroll et al. ( 1994 , 1999 ); cultural money attitudes seem to have no significant effects on savings. In our case, this result can be attributed to the fact that saving is a behaviour largely practised by our respondents (69.9% of them usually put money aside every month, see Fig.  2 ) and more generally by the entire Swiss population (OECD, 2015 ). Inversely, we observe a significant relation between attitudes towards money and indebtedness, and between the type of debts (overdue bill(s) or leasing). Footnote 13 A high score on the prestige–power attitude axis increases the tendency to contract debts (odds ratio of 1.16) and to have overdue bill(s) (1.22), which is consistent with our hypotheses and with earlier research on compulsive buying (Roberts and Jones, 2001 ; Roberts and Sepulveda, 1999 ). From another angle, the fact of being sensitive to economical management attitudes diminishes the risks of having overdue bills (0.74), which we can explain by the fact that the individuals concerned probably have sufficient foresight to pay their bills in time. It is interesting, however, to note that this attitude does not have a link to savings, no doubt because—as we have already said—the practice of saving is widespread in Switzerland. It is also important to note that the goal-oriented attitude has no significant effect on either of the economic outcomes examined.

Although attitudes towards money can have a certain link to economic practices, we note that it is above all certain control variables that have a considerable effect. Income level has a strongly positive influence on the capacity to save, as does the composition of the household. Young people living with their two parents have a much higher savings capacity, which perhaps also explains why their propensity to incur debts, to have overdue bills or to take out leasing is much lower than that of those living alone or as a couple. We also note that a tertiary level of education considerably reduces the risks of contracting debt, taking out leasing or having overdue bills, which is consistent with the results of the study conducted by the FSO (Christin, 2012 ; Fleury and Christin, 2015 ).

Finally, we note the highly significant impact of the linguistic region on financial practices. Controlled using the other parameters examined, we note that inhabitants of the French-speaking region are clearly less inclined to save (odds ratio of 0.53), while the probability of them contracting a debt (1.62), taking out leasing (2.77) or having overdue bills (1.87) is higher than that of those in the German-speaking region. Those in the Italian-speaking region stand out because of the much higher propensity (5.78) to take out leasing. They also have a higher probability of contracting a debt (1.51) than those in the German-speaking region. These results point to the existence of other cultural influences that were not integrated in the multilevel model, because we reiterate the fact that here, we address the net impact of the linguistic regions, controlled using the other parameters of the equation; notably the attitudes towards money, but also socio-economic values such as revenue, type of habitation, level of education or main activity and, most importantly, the canton-level effect. These other cultural influences can be linked to the two main theories mentioned at the beginning of the article on the cultural differences between the German-, French- and Italian-speaking Swiss: the vision of the state (Eugster et al. 2011 , Eugster and Parchet, 2013 ) and the time preferences (Guin 2017 ). Consequently, our explanations do not invalidate previous explanatory theories but propose a complementary approach.

5 Conclusion

This study contributes to the culture and finance literature in several ways. First, it emphasises the strong homogeneity of meanings of money in Switzerland among young people. The majority of our respondents see money essentially as a means to reach their autonomy in terms of freedom, achievement and doing what they enjoy. They also express a strong attachment to savings, to being solvent and to having a balanced budget. This result can partly be explained by the fact that our study population is in a specific period of life marked by entering adulthood and access to financial independence (Galland, [ 1984 ] 2009; Henchoz, Plomb, Poglia Mileti, and Schultheis, 2016 ). This homogeneity is confirmed by the limited predictive capacity of the models. Given the low number of significant relationships and the low impact of the independent variables, the parameters considered in Table  3 globally account for a small part of the variation of the variables studied. In other words, few specific demographic characteristics distinguish the individuals who are closer to one or the other money attitudes identified (see Section 4.3 ).

Second, this research shows that despite this strong national homogeneity, different attitudes towards money nevertheless co-exist in Switzerland and that they are associated with the linguistic region but not in the manner we expected. Brown et al. ( 2018 ) already demonstrated that German-speaking students aged 15 years had a different attitude to money than their French-speaking counterparts, and we confirm this result in our present study. However, the three main attitudes towards money that emerge: prestige and power, economical management and a goal-oriented attitude, are all adhered to more strongly in the French-speaking region of Switzerland than in the German- and Italian-speaking regions. We interpret this result by the fact that the French-speaking Swiss seem to attribute more social significance to money. For them, money is more ‘embedded’ (Polanyi, [ 1944 ] 1983) in social relations and in status-related, power, management and goal issues than for German- and Italian-speaking Swiss, who seem to have a more instrumental perception of money.

Third, our research also contributes to the culture and finance literature by documenting the link between culture and economic outcomes. It identifies a relation between cultural attitude towards money and financial practices. It nevertheless also reveals that this relation varies depending on the type of practices concerned, which seems to confirm previous research on saving and credit card use (Carroll et al. 1994 , 1999 ; Roberts and Jones, 2001 ; Roberts and Sepulveda, 1999 ). We show that there is, above all, a link with indebtedness. The prestige–power attitude can be related to the presence of debts and leasing contracts, and the economical management attitude has a negative impact on the presence of overdue bills.

These results also have a strong relevance for policy-makers, notably within the framework of financial literacy programmes. While financial literacy is intended to improve financial skills and encourage forward-looking behaviour while taking money attitudes and consumption into account, it is also necessary to construct programmes adapted to issues that are specific to differing cultural contexts, and that genuinely take into account the cultural, subjective attitude towards money.

https://www.bfs.admin.ch/bfs/fr/home/statistiques/situation-economique-sociale-population/revenus-consommation-et-fortune/endettement.html , table je-f-20.02.04.01

https://www.bfs.admin.ch/bfs/fr/home/statistiques/situation-economique-sociale-population/revenus-consommation-et-fortune/endettement.html , table je-f-20.02.04.01.

According to Eugster and Parchet ( 2013 , p. 9), ‘French-speaking respondents expressed stronger support for redistribution and social services, even at the expense of higher taxes’ and Italian-speaking groups are more in favour of expansions of social insurance (Eugster et al. 2011 ).

http://fns.unifr.ch/jeunes-et-argent/fr .

Since the FSO no longer provides addresses for specific research projects, these were obtained from a private company (AZ Direct) that constitutes its own registers.

As the basis for the determination of the linguistic regions, we use the municipality (commune) of residence. In our analysis, we make no distinction between the linguistic region and the language spoken by our respondents. The tests conducted on our respondents show that the linguistic region corresponds 98% to the two items of our questionnaire that are the language spoken and the language learned in secondary school. Thus, it is impossible to decorrelate these two variables (linguistic region and language) and the effect of one on the other cannot be identified.

Containing around 50 items, the questionnaire took 20–25 min to complete and was available online in German, French and Italian.

See Appendix for characteristics of respondents

The PCA was the subject of an orthogonal rotation (complete decorrelation of the factors) in order to facilitate their interpretation and to make them more pertinent at the theoretical level. One thousand three hundred sixty-four cases are valid on all the variables, meaning only 26 cases lack one or the other (2%).

The Kaiser–Meyer–Olkin (KMO) coefficient of 0.68 shows that the summary of the 10 variables measured is a technically satisfactory solution, while the 52% variance explained by the three factors denotes their good representation of the global complexity of information.

The three value axes are standardised variables (mean = 0 and standard deviation = 1). The French-speaking Swiss have 0.28 standard deviation more than the German-speaking Swiss, which is a high score.

See Appendix for description of the variables.

31.5% of our respondents have debts; 11.2% have overdue bill(s) and 7.42% a leasing contract.

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Acknowledgements

The authors thank colleagues at the Fribourg University Department of Sciences des cultures, des sociétés et des religions , especially Laura Mellini for Italian translation of the survey. We also thank Nicolas Pekari (FORS/Unil) for technical assistance for Limesurvey and questionnaire design; Brenda Kübler for the English translation of the manuscript; Alexis Gabadinho for his participation in study conception; as well as participants at the 2016 AISLF International workshop for valuable comments. Last but not the least, we are grateful to Martin Brown and Thomas Spicher (St-Gallen University) for their interest and encouragements, Rafael Lalive and the anonymous reviewers of Swiss Journal of Economics and Statistics for their constructive suggestions and criticisms.

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Henchoz, C., Coste, T. & Wernli, B. Culture, money attitudes and economic outcomes. Swiss J Economics Statistics 155 , 2 (2019). https://doi.org/10.1186/s41937-019-0028-4

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Exploring the Antecedents of Money Attitudes in China: Evidence From University Students

1 School of Teacher Education, Nanjing Xiaozhuang University, Nanjing, China

2 School of Physical Education, Nanjing Normal University, Nanjing, China

Associated Data

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

With rapid economic growth and institutional reform, the pursuit of money and material possessions has become the most prevalent value in contemporary China. This study focuses on the cultural root of money attitudes among the young adults. Specifically, 332 Chinese university students participated in a survey to report on their need for power, need for achievement, belief in guanxi , and love of money. Confirmatory factor analysis and regression analysis were applied to test the proposed hypotheses. The results show positive influences of need for power and need for achievement on individuals’ love of money. Moreover, belief in guanxi mediates the relationship between need for power and love of money. The application of indigenous cultural concepts in analyzing social behavior in Eastern cultures is emphasized. Limitations and directions for future research are also discussed.

Introduction

The great economic growth and institutional reform in the past four decades have substantially changed social norms and individuals’ behaviors in China. Modern China has witnessed a drastic transition from “to be poor is glorious” in the pre-opening up era to collective pursuit of wealth and material possessions ( Faure and Fang, 2008 ; Yang and Stening, 2013 ). Leung (2008) states that “materialism” is the most fitting term to describe contemporary Chinese culture.

As the essence of industrialized society, money is the core instrument of business and the measure of value ( Smith, 1776/1937 ). In a collectivistic culture such as China’s, people are very likely to be affected by others; thus, there is a tendency to conform to uniform values and chase common goals ( Sun et al., 2014b ). In the pre-opening up era, the prevalent goals were “serving the people wholeheartedly” and “dying for the interests of the country” ( Sun et al., 2014a ). Reform initiatives since 1978 have held economic growth as the first priority and insisted that all efforts should serve this goal. The government proposed a pragmatic strategy that focuses on concrete goals such as developing productivity and raising people’s living standards. Under these circumstances, “it is glorious to be rich” has permeated all of society as a collective ideology ( Faure and Fang, 2008 ). Today, money has become the most prevalent topic in the daily lives of Chinese people.

Love of money reflects one’s attitudes toward money. It affects various social and managerial behaviors, such as pay and job satisfaction, turnover intention, and unethical behavior (e.g., Tang et al., 2000 ; Tang and Chiu, 2003 ; Froese and Xiao, 2012 ). However, few studies investigate its antecedents, especially from cultural perspectives. This research focuses on money attitudes among Chinese university students and explores their antecedents from an indigenous guanxi perspective. We believe cultural constructs developed by Western societies may fail to completely capture the nuances in Eastern society. Indigenous concepts could help researchers explain specific phenomena in a particular culture and extend that understanding to social behavior ( Chinese Culture Connection, 1987 ).

China is a hierarchical society with a high power distance ( Hofstede, 1980 ) and strict ordering relationships ( Bond and Hwang, 1986 ). Under these circumstances, people are very sensitive to their positions in the social structure ( Leung and Chan, 2003 ). Cheng (1990) argued that the social role, not the self, determines one’s behavior. Gao et al. (1996) found that in China, the impact of an individual’s voice heavily depends on his or her social position. When an individual has obtained a high standing in society, they are more likely to possess substantial control over scarce resources. Thus, in China, people are keen to attain achievement and power that can advance the ultimate goal to obtain wealth and social approval. From a young age, Chinese people are told, “You must work hard to get ahead of others.” This indoctrinates people to compete with others to gain achievements and status rather than settle for a self-contented life. For an adult, the major criterion for selecting one’s job is income, not personal interest. This is also reflected in consumer culture. Branded products are bought to signify power, achievement, and status rather than to satisfy personal needs ( Li et al., 2015 ; Sun et al., 2016 ; Wang et al., 2020 ).

In addition, Confucianism contends that society is based on the five cardinal relationships ( wulun ): the relationships between ruler and subjects, parent and child, husband and wife, elder and younger sibling, and friends. A Chinese man would view himself as a son, a father, a husband, a brother, and a leader. In these relationships, everyone should behave properly according to his or her own position. Chinese people believe this is the ideal way to organize a harmonious society through a well-defined hierarchy, so they accept this established structure and tend to respect and defer to authority ( King and Bond, 1985 ).

Guanxi , a term that literally means “interpersonal connections,” originated in this cultural context. It is regarded as a cultural orientation that reflects a series of traditional ethical concepts, such as hierarchy, interdependence, and reciprocity ( Hwang, 1987 ). Chinese people need to deal with guanxi -related issues in their everyday lives. To build guanxi , first people are required to avoid conflict and maintain harmonious relationships with others ( Leung et al., 2011 ). However, conflict avoidance alone is far from enough. Quality guanxi further requires the maintenance of long-term relationships based on mutual commitment, obligation, and especially benefit. Because people with high social positions take advantage in resource distribution, having good guanxi with power and authority can help one obtain psychological and practical benefits. Previous studies have highlighted the profound implications of guanxi for business activities in China. For instance, in a workplace, high-quality guanxi with supervisors ( Cheung et al., 2009 ; Li et al., 2018 ), customers ( Li et al., 2017 ), business partners, and government authorities ( Gu et al., 2008 ; Bedford, 2011 ; Chen and Bedford, 2021 ) greatly improves job satisfaction and work performance from the personal to the corporate level. In this study, we identify guanxi as a cultural root of people’s love of money in China and explore its role in predicting individuals’ love of money.

Need for Power, Need for Achievement, and Love of Money

Achievement and power are basic human needs ( Schwartz, 1992 , 1994 ). In modern society, money is the key indicator that signifies achievement and power. Thus, people with a high need for achievement and power tend to satisfy their needs through the pursuit of money. In modern industrialized societies, people prefer to consider themselves independent from others. Individual attitudes are the dominant factor influencing their behavior, and the social normative influence is weak; thus, the pursuit of money is mainly due to a desire for personal achievement. However, in China, such a traditionally collectivistic country with a high power distance, people rely on others to live and are very concerned about their social position and prestige. It is believed that traditional and modernized mindsets co-exist in contemporary China ( Faure and Fang, 2008 ). Thus, we propose that both need for power and need for achievement drive individuals’ love of money, and we in turn propose the following hypotheses:

• H1a: Need for power positively relates to love of money.
• H1b: Need for achievement positively relates to love of money.

The Mediating Role of Belief in Guanxi

Guanxi reflects “an informal, particularistic personal connection between two individuals who are bounded by an implicit psychological contract” ( Chen and Chen, 2004 , p. 306). It emphasizes some personal qualities, such as loyalty, obedience, and sincerity ( Tan and Snell, 2002 ). In the Chinese organizational environment, guanxi determines one’s prospects to a large extent ( Bozionelos and Wang, 2006 ; Wei et al., 2010 ). At the corporate level, it can lower transaction costs ( Standifird and Marshall, 2000 ), substitute for formal legal structure ( Xin and Pearce, 1996 ), and/or provide a competitive advantage that helps companies achieve superior performance ( Luo and Chen, 1997 ; Tsang, 1998 ). Thus, it is identified as the core competence leading to success in China for both individuals and organizations ( Yeung and Tung, 1996 ; Zhang and Zhang, 2006 ; Gu et al., 2008 ).

In previous studies, researchers have classified guanxi into different types ( Hwang, 1987 ; Tsang, 1998 ; Su and Littlefield, 2001 ; Fan, 2002a , b ; Chen and Chen, 2004 ; Zhang and Zhang, 2006 ). First, qinqingguanxi is present among family members or relatives ( jiaren ) based on blood and driven by emotional affection and obligations. This type of guanxi is strong and stable, so it could last for a long time. Second, renqingguanxi is based on favorable exchanges. The participants in renqingguanxi are mostly acquaintances ( shuren ), such as friends, classmates, and colleagues. In this type of guanxi , the participants need to observe the reciprocity rule, or they will owe others a debt ( renqingzhai ). The last category is jiaoyi guanxi . This type of guanxi is highly related to rent-seeking and power abuse. When people have difficulties, they tend to first ask for help from powerful people who can use social dominance to obtain benefits on their behalf. It is believed some renqingguanxi and most jiaoyi guanxi happens in workplace and business environments, essentially through the process of exchanging money for power and vice versa ( quanqianjiaoyi ) ( Su et al., 2003 ). Fan (2002a , b) maintains that business ( jiaoyi ) guanxi links money to power and corruption. He further asserts that all business guanxi is tainted by corruption, and every act of corruption is related to using guanxi . Similarly, Lovett et al. (1999) even considers guanxi synonymous with corruption and bribery.

Luo (2008) proposes a taxonomy of intertwinement between guanxi and power based on two dimensions: the form of guanxi and the level of power abuse. According to Chinese tradition, people should not ask for money when they offer help, or else it will impair affection ( tan qianshangganqing ). Even if you want to thank the helper, a small gift is enough to express your deep affection ( li qingyizhong ). Otherwise, the guanxi will be damaged ( jianwai ).

However, when materialism and money worship become prevalent in society, people judge success primarily based on material possessions and monetary wealth. Under these circumstances, guanxi between jiaren and shuren also has an instrumental character that relates to unethical behavior. Thus, some researchers have expressed concern that the rampant use of guanxi for personal gain denies social justice and leads to a morally bankrupt society ( Fan, 2002a ; Luo, 2008 ). Because guanxi greatly relates to power and money in Chinese society, positive relationships between these concepts are expected. Specifically, people who seek power tend to use guanxi to obtain monetary benefits. Considering the strong correlation between power and achievement, we assert that guanxi links achievement to money as well. In this study, we define belief in guanxi as the extent to which an individual thinks guanxi can help one achieve business success, we propose it will play a mediating role in the relationship between individuals’ need for power/achievement and love of money, and we in turn propose the following hypotheses:

• H2a: Belief in guanxi mediates the relationship between need for power and love of money.
• H2b: Belief in guanxi mediates the relationship between need for achievement and love of money.

Materials and Methods

For this study, data were collected from students of a public university in Jiangsu Province, East China. We distributed the survey and collected the data online. A cover letter was attached to ensure that participation was voluntary and anonymous. A total of 332 students participated in this research, 129 males and 203 females. The mean age of the sample population was 20.3 years.

Established scales are used to measure the variables investigated in this study. Specifically, we adopt the scales from Liu et al. (2010) to measure need for power and need for achievement. Each construct is measured with four items. Sample items include “I want other people to act in my way,” and “I love to confront the challenges of the job.” The Cronbach’s α for need for power and need for achievement are 0.83 and 0.83, respectively.

Six items were selected from Su et al. (2003) to measure the degree to which guanxi is important in business activities. A sample item is “In business, it is important to maintain a good network of relationships.” The Cronbach’s α is 0.91.

Four items were adopted from Tang and Chiu (2003) to measure love of money. A sample item is “Money is important.” The Cronbach’s α is 0.92.

All the items were rated with a 7-point Likert scale. The translation and back-translation methods were used.

Data Analysis

Before examining the hypothesized relationships, we first conducted a confirmatory factor analysis (CFA) with AMOS to estimate the measurement model, which consists of four constructs measured by 18 observed items. In Table 1 , the CFA result of the baseline four-factor model was compared with those of three alternative models. The results indicate that the alternative models exhibited significantly poorer fit than the baseline model, which shows a fairly good fit ( Steiger, 1980 ): χ 2 = 245.7, df = 129, χ 2 / df = 1.90, GFI = 0.93, CFI = 0.97, TLI = 0.96, RMSEA = 0.05. Moreover, all factor loadings are above the critical value of 0.5 (ranging from 0.63 to 0.92) for adequate individual item reliability ( Bagozzi and Yi, 1988 ). In addition, the composite reliabilities of all the scales are all greater than 0.8 (ranging from 0.83 to 0.92), which illustrates sound psychometric properties ( Bagozzi and Yi, 1988 ). The average variance extracted (AVE) for each of the four constructs is above 0.54.

Confirmatory factor analysis of the measurement models.

NFP, need for power; NFA, need for achievement; BIG, belief in guanxi; LOV, love of money.

Table 2 shows that no correlation between any two variables exceeds the square root of their AVE, demonstrating adequate discriminant validity between each construct and any other construct ( Fornell and Larcker, 1981 ). Specifically, need for power positively relates to need for achievement ( r = 0.37, p < 0.01), belief in guanxi ( r = 0.42, p < 0.01), and love of money ( r = 0.29, p < 0.01). Belief in guanxi weakly correlates with need for achievement ( r = 0.16, p < 0.01) but has a stronger relationship with need for power ( r = 0.48, p < 0.01).

Correlations between the variables.

** p < 0.01.

a Numbers on the diagonal show the square root of the AVE.

We follow the steps suggested by Baron and Kenny (1986) to test the mediating effect. A series of regression analyses was conducted with SPSS. The results of model 2 in Table 3 show that after controlling for age and gender, both need for power ( r = 0.25, p < 0.01) and need for achievement ( r = 0.13, p < 0.05) positively affect love of money. When we included belief in guanxi in model 3, the influence of need for power on love of money was not significant. However, need for achievement was still correlated with love of money ( r = 0.13, p < 0.05), and the magnitude of effect did not change. Moreover, the increased R 2 value (0.16) resulting from adding belief in guanxi in the regression is relatively large, illustrating that the impact of need for power on love of money was completely mediated by belief in guanxi ( Baron and Kenny, 1986 ). Thus, H1a, H1b, and H2a are supported, but H2b is not validated.

Results of the regression analyses.

*p < 0.05; **p < 0.01.

Its strong economic development and huge population make China fertile ground for both business leaders and social science researchers. We are witnessing an increasing number of studies focusing on this ancient but vigorous market. However, its unique culture, history, institutions, and other socio-economic factors present a challenge.

This study explores the mechanism by which the need for power and achievement drives money orientation among Chinese university students. Specifically, belief in guanxi mediates the influence of need for power on love of money, but it does not play the same role in the relationship between need for achievement and love of money. This result shows that although achievement and power are strongly correlated, they are distinct from each other. Power refers to social prestige, control, or dominance over people and resources, whereas achievement is defined as personal success through demonstrating competence ( Schwartz, 1992 , 1994 ). Subtle differences can be found in the definitions. Achievement is individual-directed and based on personal effort, whereas power is social-directed and mostly manifested in the process of interactions with others. This can explain why, compared to achievement, power is more closely related to guanxi , which originated in Eastern collectivistic societies.

In addition, this finding validates the proposition that guanxi carries additional connotations of power and rent-seeking that facilitate the achievement of monetary success. Ubiquitous materialism leads to pervasive pragmatism: almost everything is used as a means to pursue the ultimate goal—money. This attitude alters the meaning and significance of things. For example, it is well known that the Chinese place great importance on education. The real reason for this is that educational success can pave the way to power and authority, which is the major means of accessing scarce resources ( Lin and Wang, 2010 ). MBA or EMBA courses have become a venue where students can build a guanxi network ( Faure and Fang, 2008 ). Some business schools even set up golf classes because guanxi is not only built at the dinner table but also on the golf course.

Implications

As Asia’s economies develop and its emerging markets become the focus of business research, unique cultural insights are required ( Burgess and Steenkamp, 2006 ). Indigenous concepts could help researchers explain specific phenomena in a particular culture. For instance, an important traditional Confucian concept, face ( mianzi ), has already been identified as a major factor that drives brand name fever among Asian consumers ( Wang et al., 2019 ; Zhang and Wang, 2019 ; Sun et al., 2021 ). Researchers have also examined its roles in consumers’ responses during service encounters ( Keh and Sun, 2008 ; Chan et al., 2009 ). Other Chinese indigenous variables, such as harmony ( hexie ) and social favors ( renqing ), also have great business implications ( Yen et al., 2011 ; Sun et al., 2014a ; Li et al., 2017 ). Indigenous constructs from other societies include the Korean concept of cheong , reflecting human affection ( Choi et al., 1993 ) and the Mexican concept of simpatia , which means avoidance of conflict ( Triandis et al., 1984 ).

Although these concepts originated in non-Western societies, they are not necessarily culture specific. In fact, Western scholars studied face several decades ago ( Goffman, 1955 , 1967 ). Western people also try to gain face, so the concept does exist in Western societies ( Ho, 1976 ; Ting-Toomey and Kurogi, 1998 ). Recent empirical cross-cultural studies have found evidence of the face construct in both Eastern and Western respondents ( Cocroft and Ting-Toomey, 1994 ; Oetzel and Ting-Toomey, 2003 ; Chan et al., 2009 ). Similarly, belief in fate ( karma ), originating from Buddhism, is popular in China and India and affects consumer behavior ( Chan et al., 2009 ; Kopalle et al., 2010 ), but it is also found in other societies as a universal dimension ( Leung et al., 2002 ). An interesting study shows that a series of Chinese indigenous personality dimensions—including face, harmony, social favor, and defensiveness ( AhQ attitude)—are replicated fairly well in an American sample, demonstrating the generalizability of these indigenous constructs ( Lin and Church, 2004 ). This idea provides a new possibility for testing the role of culture in business and social behavior in the future: start with initial research on a question in one’s own culture based on indigenous concepts and then test the theory in other cultures. If possible, make a cross-cultural comparison to build a cultural-universal theory. This proposition is consistent with Berry’s (1989) five-step imposed etic process.

Limitations and Directions for Future Research

The current study has several limitations. First, our sample only includes university students. It has been shown that values and mindsets differ across generational cohorts that have totally different childhood experience ( Ralston et al., 1999 ; Hung et al., 2007 ; Wang et al., 2022 ). In the future, scholars should replicate this research in other populations, and, if possible, make a cross-generational comparison to enhance generalizability. Second, because this is a cross-sectional study, we could not verify the existence of causal relationships. In future, longitudinal or experimental research should be conducted to further validate the findings.

Data Availability Statement

Ethics statement.

Ethical review and approval was not required for the study on human participants in accordance with the local legislation and institutional requirements. Written informed consent for participation was not required for this study in accordance with the national legislation and the institutional requirements.

Author Contributions

YL and FH developed the theoretical framework and completed the manuscript writing. YL worked on data collection and analysis. Both authors contributed to the article and approved the submitted version.

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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Biology undergrad student, Caroline Carwie, published in The Classic

In May, Caroline Carwie’s essay “Attitudes Toward and Experiences of Pregnant Medical Students” appeared in The Classic , the Writing Intensive Program’s journal of undergraduate writing and research. This paper explores “[p]regnancy during medical school” and how “institutions can help new mothers by acknowledging risks and implementing appropriate policies.” You can read the latest issue and find out more about The Classic online at http://theclassicjournal.uga.edu/ .

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Link to Issue 10.2

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Thursday, August 8, 2024

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Fears of a NATO Withdrawal Rise as Trump Seeks a Return to Power

Current and former European diplomats said there was growing concern a second Trump presidency could mean an American retreat from the continent and a gutting of NATO.

Former President Donald J. Trump has made it clear that he primarily sees NATO as a drain on American resources. Credit... Doug Mills/The New York Times

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By Jonathan Swan Charlie Savage and Maggie Haberman

• Published Dec. 9, 2023 Updated July 10, 2024

In December, The New York Times published a deep look at the implications for NATO if Donald J. Trump were to win the 2024 presidential election. With NATO leaders gathering in Washington this week to celebrate the alliance’s 75th anniversary, that possibility has only taken on greater urgency.

For 74 years, the North Atlantic Treaty Organization has been America’s most important military alliance. Presidents of both parties have seen NATO as a force multiplier enhancing the influence of the United States by uniting countries on both sides of the Atlantic in a vow to defend one another.

Donald J. Trump has made it clear that he sees NATO as a drain on American resources by freeloaders. He has held that view for at least a quarter of a century.

In his 2000 book, “The America We Deserve,” Mr. Trump wrote that “pulling back from Europe would save this country millions of dollars annually.” As president, he repeatedly threatened a United States withdrawal from the alliance.

Yet as he runs to regain the White House, Mr. Trump has said precious little about his intentions. His campaign website contains a single cryptic sentence : “We have to finish the process we began under my administration of fundamentally re-evaluating NATO’s purpose and NATO’s mission.” He and his team refuse to elaborate.

That vague line has generated enormous uncertainty and anxiety among European allies and American supporters of the country’s traditional foreign-policy role.

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