Dough, wonga, greenbacks, cash. Just words, you might say, but they carry an eerie psychological force. Chew them over for a few moments, and you will become a different person. Simply thinking about words associated with money seems to makes us more self-reliant and less inclined to help others. And it gets weirder: just handling cash can take the sting out of social rejection and even diminish physical pain.

This is all the stranger when you consider what money is supposed to be. For economists, it is nothing more than a tool of exchange that makes economic life more efficient. Just as an axe allows us to chop down trees, money allows us to have markets that, traditional economists tell us, dispassionately set the price of anything from a loaf of bread to a painting by Picasso. Yet money stirs up more passion, stress and envy than any axe or hammer ever could. We just can’t seem to deal with it rationally… but why?

Our relationship with money has many facets. Some people seem addicted to accumulating it, while others can’t help maxing out their credit cards and find it impossible to save for a rainy day. As we come to understand more about money’s effect on us, it is emerging that some people’s brains can react to it as they would to a drug, while to others it is like a friend. Some studies even suggest that the desire for money gets cross-wired with our appetite for food. And, of course, because having a pile of money means that you can buy more things, it is virtually synonymous with status – so much so that losing it can lead to depression and even suicide. In these cash-strapped times, perhaps an insight into the psychology of money can improve the way we deal with it.
Relative values

Even as a simple medium of exchange, money can take a bewildering variety of forms, from the strips of bark and feathers of old, through gold coins, pound notes and dollar bills to data in a bank’s computer – mostly cold, unemotional stuff. The value of £100 is supposed to lie in how much beer or fuel it can purchase and nothing else. You should care no more about being short-changed £5 at the supermarket checkout than losing the same amount when borrowing money to buy a £300,000 house. Similarly, you should value £10 in loose change the same as £10 in your bank account that you’ve mentally set aside for your niece’s birthday.

In reality we are not that rational. Instead of treating cash simply as a tool to be wielded with objective precision, we allow money to reach inside our heads and tap into the ancient emotional parts of our brain, often with unpredictable results. To understand how this affects our behaviour, some economists are starting to think more like evolutionary anthropologists.

Daniel Ariely of the Massachusetts Institute of Technology is one of them. He suggests that modern society presents us with two distinct sets of behavioural rules. There are the social norms, which are “warm and fuzzy” and designed to foster long-term relationships, trust and cooperation. Then there is a set of market norms, which revolve around money and competition, and encourage individuals to put their own interests first.

Economic exchange has been going on throughout human history, so it is possible that our ancestors evolved an instinctive capacity for recognising the difference between situations suited to social or market norms, and that this could have developed well before the invention of money. Alternatively, we may learn the distinction.


Mark Buchanan
New Scientist