my attitude towards money essay

Money controls our lives. It's time to rethink our relationship with the almighty dollar

'Materialism shouts so loudly that it overrides our caring about other things' Image:  REUTERS/Toby Melville

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This year, 1 March marks the beginning of Lent in the Western church. For many, it will be a time to give up a personal vice – numerous people opt out of chocolate or alcohol, although fasting from social networks is becoming increasingly popular. It is a time to go without, and in doing so, draw closer to the one whom Christians follow, Jesus Christ. It is an opportunity to replace something that has some control over us with the liberating relationship we can have with Jesus.

Recently, I have been spending a lot of time thinking about the control that money has over our lives. In fact, for better or worse, I wrote a book about the relationship we have with money. It is called Dethroning Mammon and will be used by some churches this coming Lent as a study book that digs a little deeper into this relationship.

To me, it seems that the more interconnected the world becomes, the more power is held over individuals and nations by economics, money and flows of finance. In so many human crises, money plays a part – it is treated as both the problem and the solution. In the Gospels, the name Jesus gives to this force is Mammon.

Spending time at the World Economic Forum with people who lead countries, international organizations and corporations, is deeply enjoyable and educational. The theme of the 2017 Annual Meeting , Responsive and Responsible Leadership, offers an opportunity to reflect on how our personal and corporate attitudes to money and economics affect how we see the world and those with whom we share it.

The problem with materialism is not that it exists, but that it dominates. It shouts so loudly that it overrides our caring about other things. This is demonstrated particularly in how we measure things and ascribe value. If we can’t measure something, then there is a tendency not to value it as much as something that is easily measurable.

A book that is a particular favourite of mine is The Shield of Achilles by Philip Bobbitt. In it, amongst other things, he charts the evolution of the state. One of his most perceptive theses is that we no longer live in an age of the nation state, but rather of the market state. In the market state, the success or failure of the state and its government is measured entirely by the capacity to consume more or less. Economics is an end in and of itself, rather than a tool by which we pursue the common good.

As I have been thinking and writing about these matters, I have actively tried to avoid the typically negative attitude towards money that is often found in the church. Supply and demand, risk and reward, the gift of the free market to agreeably locate goods, the need for balance in the flows of money within the economy – all continue to be relevant. But they are not God.

Money itself isn’t negative or bad, but our attitude towards money can certainly have a deeply negative impact on our relationships and priorities.

The challenge, then, is to be increasingly aware of how money affects us as individuals, as well as at a systemic level. Very often, the more we have or are responsible for, the harder we have to work at maintaining this awareness and building habits into our lives that dethrone the emotional and ethical control that economics or money holds over us.

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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

Carolyn gregoire, you may also enjoy.

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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.

Where your work meets your life. See more from Ascend here .

How do you feel about money?

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

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The learning network | what are your attitudes toward money.

What Are Your Attitudes Toward Money?

Questions about issues in the news for students 13 and older.

• See all Student Opinion »

Are you a spender or a saver? Do you budget? Do you often wonder how much money others have? Are you more likely to choose a career because it pays well or because you love doing the work? What do you think someone’s net worth says about him or her? This week’s Times Magazine, devoted to money, takes on some of these questions.

In an article from this issue of the Magazine called “Net-Worth Obsession,” Ron Lieber writes about several people who publicly post and track their net worth on the Web, including 25-year-old Eric Mill:

Eric Mill wasn’t thinking about his happiness when he created a Web site called Ohnomymoney two years ago. He was thinking in part about societal taboos — and how to thumb his nose at them. The site shows five numbers: his credit-card and student-loan debt, his checking- and savings-account balances and his net worth, which is currently about negative $12,400. The site updates most of the figures automatically every day through a feed from Wesabe, another site, like Mint, that pulls data from personal financial accounts. […] What he was trying to do when he began the site in May 2008, he says, was start a conversation […] “The taboo around talking about money is ill-founded,” he says. “When you’re the only person dealing with it, you’re subject to all of the dysfunctions we all have. If we could all be a little less uptight and more communicative and social about it, we’d be getting better advice, and it wouldn’t be the sort of thing that we stress about privately.”

Students: Tell us your attitudes about money. Do you tend to spend it carelessly, or budget and save? How much do you think about money in general? Do you agree with Eric Mill that most people are “uptight” about discussing it, or do you think that one’s net worth is a private thing?

Students 13 and older are invited to comment below. Please use only your first name. For privacy policy reasons, we will not publish student comments that include a last name.

Teachers: Here are ten ways to teach with this feature.

Comments are no longer being accepted.

Money is the secret to life so you have to spend money to make money

my atttitude about money is i think about money is carelessley about it when i want something i would buy it without thinking about it i would not think that i could have a better deal i am not a budgeter and i just sav the money and use it when i need it.

In my case, i tand to buy something without thinking about it. So, this year, i start to save some money in my bankcard every month. And, nowadays, i’ve been clearing out my wallet to put any money, So, i can save the money.

I hate money. It makes people greedy and causes them to lose sight of what is important in life. I use money only when I need it.

I think money is very important. However it’s not everything. It’s taboo because people think it’s their reason for living and if they don’t have enough then their life is in shambles. I think money is great, however currency can’t pay for everything…but it does help!

As a high school senior recently faced with the overwhelming financial burden of undergraduate education in this country, I can honestly say that money is important. Over the past year I’ve applied and been accepted to some of the highest-rated schools in the country. Yet, at the same time, I’ve been forced to consider the possibility of student loan debt above and beyond what I had previously predicted. Money, in the form of education costs for instance, has brought those around me to open up about all aspects of life. Thankfully, I was able to earn a large merit scholarship at a well-respected liberal arts college. There are many who, unlike myself, will be forced to take on 50k or more in educational debt. In “the greatest economic disaster since the Great Depression” many of the most affected individuals are students, working hard to earn admission into the schools of their dreams and being forced to pay through the nose to attend. In some cases borrowing can open new opportunities, in others it can lead to crushing financial consequences. I believe money is only a part of greater indicators of success yet I recognize its power to enable and simultaneously inhibit essential societal progress.

I have to agree that money are important element in our society. It’s an energy which has to be always in motion. One can not concentrate an attention only on spending nor on saving. This has to be balanced out to the most efficiency. Loans has to be paid and therefore students must save. However, smart spending always a plus. If an individual can rationally spend his/her money, then it will work as a good reward method. I save and i rationally spend, since money is a scarce resource, this type of energy should be managed reasonably.

I have never really thought as money as anything. However when I bring the subject up and say something like “Honestly, do we really need money?” or “I don’t get the point of money” or even “I think the world would function better without money” then people get quiet and I’m like “What, did I say now?” My mother even told me that I fdo not see the point of money because I don not have to work for it and therefore it is quite easy to get what I want. Quite true but yet not true. You what I am trying to say is like if one country trades with another. For example maybe the U.S.A. has um let’s say lots of oil and they really need somethung that another country has ’cause they are down on resources and that country say they have to pay this amount for something that is vital to the U.S.A. at that particular moment… and the U.S.A. don’t have the money then. I t always ends up being a country in debt to another country and I don’t think that is right. Do you comprehend what I am syaing? 13-year old. -AnaisGwen-

I think money is important but it can alaso make you crazy by having too much because you wont want to help other like your family members who need the money.

Are you a spender or a saver?

–My parents tried to instill the saving principle in me since I was young. But it wasn’t really until after graduating college, and starting to completely supporting myself, that I’m learning how to save. Yes I’m starting small, b/c I don’t make much now, but I’ve been told over and over again how important is is to start saving NOW vs when I’m 25. Its the magic of compounding…

Do you budget?

–I budget for my bills and savings. I’m only 23, so there’s not much left to budget afterwards lol.

Do you often wonder how much money others have?

–Yep. But I know the difference between the glittering rich and the truly wealthy. Most of the glittering rich are in debt b/c they are trying to keep up with the Joneses.

Are you more likely to choose a career because it pays well or because you love doing the work?

–I would choose both. Its about balance… but sometimes its more valuable when we are younger to choose the job that gives us a load of experience that we need, although it barely covers our necessities.

What do you think someone’s net worth says about him or her?

–It depends on age and your history. I think for most of us young people, its a good thing just to have a positive net worth, even if it is just a couple thousand dollars (i.e. like the value of your car). No debt… good thing. Lets see how long that lasts… lol.

my attitude towards money is that i want to make it. i want a job that i love doing and pays well. i want to have enoughto get me through life andd help my kids pay for school and anything they need. also i want enough money to buy a nice house and decent car for me and my wife. so overall i want enough money to where i can have a steady life and have enough money to spend on the things i need.

Usually, when I handle money I have a hard time not spending it. I normally do end up saving it, but it is very hard for me to do. When I have my own money, I put it in a bank account and normally leave it in there until I actually need it. When I choose a career I would like it to pay well where I can live off well by myself and not have to rely on anyone but myself. I think when someone is rich it shows they are either very hard working or they have had everything handed to them their whole lives.

I think that I handle money really good. I really like saving my money, I actually get more enjoyment saving money, rather then spending it. When I spend my money, I feel really guilty afterwards and I feel like I didn’t really need whatever I bought. I don’t think too much about money, it just frustrates me when people blow money like it’s nothing. I think that most people don’t like discussing it, and I think that is a private subject for most people.

I like having money, but money is not the most important thing to me. I would rather get a job that I really like and get less paid for, rather than making a lot of money and hating my job. However I could not have a job where I got paid terribly, even though I loved it. I want to be able to have enough money so that I can have fun and be safe if something major happened where I would need money. I tend to spend money on things that I want, but at the same time I think over my purchases and try to save money, and I try not to spend money on unnecessary things. Personally I believe that one’s net worth is a private thing, but if people would like to discuss it – go ahead. However I think it is very rude to ask about it.

I am a spender because I am not good at saving money. I don’t really try to think how much money other people have. I am more likely to pick a career that I will have fun in then pick it for the money. I think someone’s net worth just says how ambitious they are really. Just because you are rich doesn’t mean that you are smarter or better then someone not as wealthy as you.

I spend unless I have something to save for. If I just have random money, I’ll spend like a crazy woman. And it’s usually lame, useless things that I buy. Like gum. I know how to save money, I’m just really, really bad at it. Although, if I need something, or really, really want it, I can save money like crazy.

My attitude towards money is definitely a love, hate relationship. When I was a little younger I didn’t care what I spent my money on or if I spent at all. Now that I’m older and driving and have a job I now save a lot more and ask myself, “Do I need this?” I don’t think about money too much, only when I need some or about to spend some or if I get some. Yes I agree with Eric because I think especially in this economy people are very embarrassed with money and are scared that their money could be gone like that.

I think that people should be very careful with their money and be responsible on how they spend it. Whenever I have money I try to be as smart with it as I can. I always try to tend to save and budget my money. I think about money a lot because I always try to save my money and be careful instead of splurging. Most people are uptight about their money because how much money one has usually tells you a little about that person.

I am definitely a spender. I don’t budget my money, but then again I don’t really make any money to budget. I don’t really wonder how much money others have because money and possessions are not that important to me. I will choose my career because what I love to do. Money will not make me happy, doing what I love makes me happy. I don’t think someone’s net worth says very much about by any means.

I kind of liked this article. My opinion on this article is that I think people should save their money more if they can because it’s a good thing. I mean I myself also does like to spend money on some things that I really want but then when I do spend too much money then I run out of it and don’t have anymore money to get the things that I really need. So that’s why I like to save my money for the things I really want or need. I don’t budget my money not yet anyway but I do save my money, I get the stuff that I really need first and if I have a little extra money left then I spend it on the things that I want. That’s what I do.

Money,money,money.I love earning money.I love working.Money is a big importance in my life because i like to do many things that cost A WHOLE LOT.Things such as shopping every week,eating out,treating myself,and weekends.Weekends i like to go out with friends and enjoy the day.We eat.We go EVERYWHERE! I always “need” a new outfit.I like my independence.I dont like asking my parents for money or anyone else for that matter.So i earn it my own way.

money is something essential in our life,and without we cant survive.Some people went to save it,and get it hapiness in gathering it.For me,money is found to make us happy.If we dont want to spend it;then why we have to gather it.

When it comes to money i always end up spending it just as fast as i get it. I don’t think about what i’m buying i just think well i got the money so why not. in less i get a large amount of money at a time then i can save it but i also just spend that on one thing that coast me that large amount so i would for sure call my self a spender.

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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.
• 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 […]
• 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 […]
• 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.
• 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.
• 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.
• 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.
• 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.
• 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 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.
• 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 […]
• 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.
• 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.
• 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.
• 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 […]
• 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.
• 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.
• 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 […]
• 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.
• 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.
• 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 […]
• 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 […]
• 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.
• 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.
• Dreams of Avarice in Ferguson’s “The Ascent of Money” The chapter “Dreams of Avarice” of the book “The Ascent of Money” explores different stages of development of money functioning in the world by relating them to corresponding historical events.
• 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.
• 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.
• 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.
• 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 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.
• 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 […]
• 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 […]
• 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 […]
• Park Avenue: Money, Power and the American Dream – Movie Analysis It can be taken as the national ethos of the citizens of the USA. The basis of the American society is broken and it is not united anymore.
• Money and Work Performance When there is a deliberate effort by the workplace to reduce the incidence of these, both the agency and the employees benefit.
• Edwin Arlington Robinson: Money and Happiness in “Richard Cory” It is evident that money cannot guarantee happiness in one’s life due to the uncertainties that surround each one of us.
• 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.
• 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 […]
• “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.
• Artworks Comparison: Les Demoiselles d’Avignon and Tribute Money Though the Les Demoiselles d’Avignon, a fresco created by Picasso, was created in an entirely different epoch than Masaccio’s Tribute Money was, the two artworks still share a range of stylistic, compositional and conceptual similarities, […]
• 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.
• 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: 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.
• 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.
• 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 […]
• 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 […]
• 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.
• 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 […]
• To Make Money or Serve the Society? However, when the issue of the corporation to serve the society arises, then it kind of compromises the main focus of the corporation, which is to make money. These have been the major causes of […]
• 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 […]
• 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.
• 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, […]
• Tax Money Usage on Military Spending Issue The fact that America won the Cold War and defeated the Soviets is taken as a vindication by the American leaders of the need to continue military spending.
• 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 […]
• “Who Says Money Cannot Buy Happiness” by Lee Investment is a production process for will it bring about goods and services that can be sold to the market and in the process, the owner of the business makes some profit.
• Technical Analysis as Active Money Management Method Technical analysis is the financial markets methodology that asserts the capability to foretell the probable course of security charges by the means of past market data study, principally price and volume.
• 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.
• 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.
• 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.
• Time Value of Money in Examples Therefore, re-purchase of the shares appeals to the managers of the company because it will allow the company uses the money to regenerate more money for the purpose of repurchase the shares in the future.
• Wall Street Managers: The Art of Making Money In the end, the goal of Wall Street managers is to ensure optimal returns in all of their investments. The evolution of Wall Street managers is etched in the history of financial markets.
• 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.
• Locke’s Second Treatise of Government and Voltaire’s Candide’s Value on Money Both written at a time when philosophers had started questioning the relevance of capitalism and the concept of wealth creation, it is evident that the two authors were keen on explaining the power of money […]
• 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.
• Fraud, Money Laundering, and Terrorism Financing After the audacious attack by Al-Qaeda and the destruction of the Twin Towers on 11th of September 2001, terrorism was declared the number one enemy to the peace and stability of the modern world.
• Time Value of Money – Preparing for Home Ownership The purchase price of the house is determined by using the following formula in Excel. 66 The down payment is 20% of the future value of the house, i.e, $40,278.13.
• Martin Van Buren: Money and Indian Relocation One of the reasons for such collaboration and understanding is the focus on the values we have. I believe this path will bring us to the land we all would like to live in.
• The General Theory of Employment, Interest and Money Money is a determinant of the propensity to consume; hence, the more money one makes, the more that he or she consumes and the converse is the case.
• The Practice of Saving Money Knowledge of the language is also a very crucial component of EAP as it aids the learner in understanding questions and responding to them in their examinations.another differentiating factor between the two varieties of English […]
• Money Market and Value-Based Pricing Consequently, the GDP can be defined by the equation: Y=C+I+G+NX where: Y= Total GDP, C=Consumption by household, I=Investment, G=Government expenditure, NX=Net Exports Net Domestic product entails the reduction of the GDP by the depreciation of […]
• How Money Markets Operate? Furthermore, only free markets have shown the resilience that is necessary to accompany the fluctuations in demand and supply of the money markets.
• Access Right to Money: Sculpture Theft Among the suspects, there are those in dire need of the money due to financial problems, while others need the values worth of the item and not the actual monetary price attached to the item.
• History of Money in Spain The production of coins melted from gold also ceased in the year 1904, with the production of that melted from silver ceasing in the year 1910.
• Money Flows and Financial Repression in the US and China From the article, the authors depict how the interest rates in developed countries like the United States compare with those of the emerging markets such as China, India, and Brazil.
• Management: “Marketplace Money” and “Undercover Boss” In this case, the accents are made on the support of the healthy workforce in order to guarantee the better employees’ performance and on the idea of rewards as the important aspects to stimulate the […]
• Money Compensation for Student-Athletes Besides, sports are highly lucrative for colleges, and students whose labor brings the revenues should share the part of them not to lose the interest in such activities.
• Chapters 1-3 of “Money Mechanics” by David Ashby The retained amount of money in the commercial bank is the primary reserve. The banks can decide to reduce their working reserve, and the money obtained is transferred to the excess reserve fund in accounts […]
• Banking in David Ashby’s “Money Mechanics” Changes in prices may not have a direct effect on the gross domestic product and the planned expenditures because this is determined by the money that is in supply. This causes the GDP and prices […]
• Karl Marx on Commodities, Labor, and Money Division of labour is very important in the production of commodities. The use-value of each commodity contains useful labour.
• The UAE Against Money Laundering and Terrorism Financing This valuation of the anti-money laundering and combating the financing of terrorism government of the United Arab Emirates is founded on the forty endorsements and the nine special commendations on extremist supporting of the monetary […]
• UAE Anti-Money Laundering Laws and Their Benefits The legal maintenance of counteraction to the legalization of criminal incomes is carried out by means of a system of laws and regulations, controlling financial, bank, and customs relations and establishing the order of licensing […]
• Money, Their Features, Functions and Importance The first hindrance is the inability of the household to monitor the activities of firms. In this case, it is used to state the value of debt.
• Happiness Without Money in Sociology and Psychology The tendency’s mechanics are simple – being in the possession of any substantial sum of money increases a person’s chance to secure a dominant status within the society, which in turn will result in strengthening […]
• Money Market Development Factors The money market is one of the fundamental elements in the functioning of any state. Under these conditions, the gradual rise of technologies and their implementation in the sphere of financial operations alter the money […]
• “God’ Money is Now My Money” by Stanley Seat It could be said that different priorities and the lack of time for supervision of the employees are the critical reasons for the violation of rules and high frequency of fraud in the religious institutions […]
• International Money Laundering Thus, money laundering has a profound impact on the state of the global economy, as well as on the economy of the U.S.
• Cybercrime and Digital Money Laundering The result of the investigation was the indictment of Western Express and a number of the company’s clients for several charges including stolen credit card data trafficking and money laundering.
• Hawala Remittance System: Anti-Money Laundering Compliance The existence and operation of money remittance systems is one of the primary features of developing economic relation at all scales from local to the global ones.
• Time Value of Money in Economies of Scale Also, the investigation of the VoF becomes easier by means of scrutinizing the tradeoff between the TVM and the EoS. The TVM is also employed to reach the integration of infrastructure investment valuation and risk […]
• Time Value of Money in Investment Planning The author of the post makes a good point that an amount of money is worth more the sooner it is received.
• David Leonhardt: May Be Money Does Buy Happiness After All The case study of Japanese citizens that support Easterlin paradox do not factor in the confounding psychological effects of the Second World War on the entire population and the country.
• Illegal Drug Use, Prostitution and Money Laundering Upon discussing the impact of money laundering, illegal drugs, and prostitution, the paper proposes the issuing of a court order restraining the use of wealth acquired from victimless crimes as one of the approaches to […]
• Getting Beyond: Show Me the Money Nevertheless, underpayment and overpayment are common, leading to dissatisfaction. Notably, compensation is part culture, but analytics will gain traction in the big data era, as start-ups leverage such advantages from experts to manage a sales […]
• Space Programs: Progress or Waste of Money? According to Ehrenfreund, the ingenuity to develop technologies and work in space is part of the progress that comes from space programs. Space programs have led to the development of technologies that improve air transport.
• “The Money Machine: How the City Works” by Coggan The media plays a chief role in educating the public concerning the various financial matters that affect the undertakings of the City.
• Money Evolution in Ancient Times and Nowadays In the means to defining what money is, most of the scholars from the psychological and physiological field have come up with the theoretical aspects of money and the ways it influences the economic growth […]
• Fraud and Crime Theory in the “Black Money” Movie The movie shows the irregularities involved in the acquisition of arms for the Saudi government. The movie is a perfect display of the international crimes and financial fraud that has been on the rise in […]
• Mercantilism, Stamped Money, and Under-Consumption It is paramount to note that he criticizes ideas of Ricardo quite frequently, and he believed that he did not consider the ideas that were suggested by other prominent economists.
• Money Evolution in the 21st Century and Before The history of the world cannot be described effectively without identifying the function of money. Money has been used to measure the value of resources and financial markets.
• Financial Crisis in Ferguson’s “The Ascent of Money” By Ferguson, the main purpose of the historian is to relieve humanity from the financial illusions on the examples of the past.
• Monetary Policy in “The Ascent of Money” by Ferguson The rise of Babylon is closely linked to the evolution of the concept of debt and credit; without bond markets and banks, the brilliance of the Italians would not have materialized; the foundation of the […]
• 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 History, Ethical and Social Standarts These moral preconditions of the emergence of money, the social conventions that regulate and control it, and the evolvement of its status in the present-day world can be regarded as the most significant events in […]
• World Money History in the 20th Century and New Objects of Value
• Locke’s Work on Interest and Value of Money
• Money in the “Sheriff of Cape Breton” Case Study
• Medieval England in “Treatise on the New Money”
• Blowing Bubbles in Ferguson’s “The Ascent of Money”
• Treatise on the New Money: Document Analysis
• Human Bondage in Ferguson’s “The Ascent of Money”
• Money History, Bonds, Market Bubbles, and Risks
• Park Avenue: Money, Power and the American Dream
• Deflation in the Quantity Theory of Money
• Money, Its Purpose and Significance in History
• “Who Stole the Money, and When?” by Greenberg
• Money History From the Middle Ages to Mercantilism
• Money Development From 600 BC to Nowadays
• Money Development and Its Stages in World History
• Market Society in “What Money Can’t Buy” by Sandels
• Employee Theft in “Who Stole the Money, and When?”
• European Union Anti-Money Laundering Directive
• T-Shirts “SENIOR 2016” and Time Value of Money
• Time and Money in “Neptune’s Brood” by Charles Stross
• “College Is a Waste of Time and Money” by Bird
• Virgin Money Company’s Business Model in Canada
• Money in History and World Cultures
• Is College Education Worth the Money
• Weddings, Marriage, and Money in the UAE
• Money and Happiness Connection – Philosophy
• The Ascent of Money: A Financial History of the World
• “Art for Money’s Sake” by William Alden
• Money’s and Banking’ Concepts
• Central Bank of Bahrain and Money Supply Regulation
• Psychological Research: Money Can Buy Happiness
• Finance: The History of Money
• Finance in the Book “The Ascent of Money” by Niall Ferguson
• Criminal Law: Blood Money From the Human Organs Sale
• Money as an Emerging Market Phenomenon
• Cyber-Crime – New Ways to Steal Identity and Money
• The Case of Stolen Donation Money
• Time Value of Money
• Money and Banking: The Economic Recession of 2007
• Money and Banking: David S. Ashby’s Perspective
• Christian Moral Teaching and Money
• Money and Capital Markets: Turkey, India and China
• Money and Capital Markets: Central Banks
• Exploring the Relationship Between Education and Money
• Anti Money Laundering and Combating the Financing of Terrorism
• Mobile Money Transfer as an Alternative Product for Vodafone Group Plc
• The Relationship Between Money Supply and Inflation
• UK and USA During the Period 2000-2010: Consumer Price Index, Unemployment Rate, Money Supply and Interest Rate
• Are Workers Motivated Mainly by Money?
• Money Mechanics in the U.S.
• Money and Markets vs. Social Morals
• Money Laundering In Saudi Arabia
• Inflation Tax – Printing More Money to Cover the War Expenses
• Banks and the Money Supply
• Money Mechanics in Banks System
• Money Laundering In Russia
• Sports and Money in Australia
• Money Supply and Exchange Rates
• Mobile Money Transfer Service
• Central Banking and the Money Supply
• The Different Roles Played By the Central Bank, Depository Institutions, and Depositors in the Determination of Money Supply
• Jean-Jacques Rousseau and Karl Marx: The Role of Money in Human Life
• How Saudi Banks Deal With Money Laundery
• The Ascent of Money
• Niall Ferguson’s ‘The Ascent of Money’
• Role of Money in the American Dream’s Concept
• Money, Motivation and Employee Performance
• Money and Commodity Circulatory Processes
• Motivate Your Employees produced by BNet Video for CBS Money Watch
• We Should Use Tax Money to Enforce Mandatory Drug Treatments on Drug
• The World Surrounded by Money
• The World of Money
• Federal Reserve; Money and Banking
• Ways to Spend Money in Saudi Arabia
• Sports Industry: Morality vs. Money
• Making Money on Music: The Company That Has to Stay Afloat
• Federal Reserve and the Role of Money in It
• What Do Money and Credit Tell Us About Actual Activity in the United States?
• What Influence Does Money Have on Us Politics?
• Can Money Change Who We Are?
• Does Government Spending Crowd Out Donations of Time and Money?
• Does More Money Mean More Bank Loans?
• Are Corporate Ceos Earning Too Much Money?
• Did the Turmoil Affect Money-Market Segmentation in the Euro Area?
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A Healthy Attitude Toward Money Leads to Financial Security

Your financial mindset or attitude toward money has a major impact on your long-term financial success.   Many of our views about money come from subconscious beliefs instilled during childhood or past experiences with money.  Your financial mindset can determine if you are more likely to be a saver or spender and if you are inclined to actively manage your finances or ignore them. Your attitude toward money has been learned over time and can be adjusted once you become aware of negative thoughts and behaviors that could be holding you back.   There are two common attitudes toward money, one of optimism and abundance and one of scarcity and pessimism.  

People with an attitude of scarcity have a negative view of money and see money as a source of anxiety, fear or disgust.  Some common beliefs include, money should not be accumulated, you don’t deserve wealth, there is never enough and if one person gains another loses. They tend to be jealous of others and think the system is rigged against them. They are pessimistic so they spend rather than saving for the future.  A negative attitude often leads to inaction and missed opportunities.  If you think you won’t reach your goals, you are less motivated to take action and may avoid planning due to the fear of not having enough.

People with an attitude of abundance see money as a tool to help them reach financial success.  They are more likely to be goal oriented with a long-term focus and appreciate what they have.  Optimism often leads to financial success.  People with a positive money attitude generally spend less than they earn, save for the future, manage their credit, give to others and plan for unexpected expenses.  

If you have negative money beliefs that are preventing you from reaching your full potential, it’s possible to unlearn those beliefs.  You need to believe in yourself to achieve financial success.  Start with small steps, set some financial goals, take personal responsibility, focus on yourself and don’t compare yourself to others.   Avoid blaming your situation on outside forces. Spend time working on your finances and approach it as an opportunity.  Wealthy people devote at least 2 hours a week thinking about and managing their money.   If you don’t understand finances, educate yourself.   There are numerous articles, webinars and books available to help improve your financial literacy.  As you become more comfortable with money your confidence will grow which will improve your financial and career success.  If you are uncomfortable with money you may be sabotaging your success.   

Practice gratitude for what you currently have, celebrate small successes and forgive yourself for past money mistakes.  Gratitude has been found to increase happiness and reduce stress which can contribute a to positive outlook toward finances.  It’s also helpful to spend time with people who will support, inspire and encourage you to look at money as a positive force.

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• My Attitude to the Money

My Attitude to the Money - Essay Example

• Subject: English
• Type: Essay
• Level: Masters
• Pages: 2 (500 words)
• Downloads: 5
• Author: roma19

Extract of sample "My Attitude to the Money"

The Money” When I was a child, I was unaware of the nitty-gritty of the world. I was an easy-go-lucky kind of individual. I was much contented with whatever I had, for there was no money-related resistance. I was lucky to be born into a family devoid of stress associated with money matters. I thought money is all and can provide me with the entire contentment, comfort, and pleasure as life gave me everything that I intended as a child. Every desire of mine was fulfilled, I never saw my father taking much hassle to earn money as it was inherited from my grandfather and I thought with the money I would be in a position to acquire every happiness in the world.

As I never witnessed any struggle for money, I thought money comes easily and could not understand why people keep pondering over the thoughts to be wealthy, when it is so easy to get money! As any child of a similar status, I also framed the impression that money is happiness and that if I have money I can do anything to accomplish my aspirations. As time passed, my understanding changed. I was quite aware of myself and started perceiving things from a different outlook. My thoughts started shaping my psychology.

My domain enhanced, and I started meeting people belonging to different economical spheres. I met individuals not from a similar background and status but those who have witnessed the true struggle of life and have come up. They seem to be relatively mature, adaptable, and full of empathy and human values. They were quite efficient and never wasted money on ineffective and worthless deeds. I discerned, their psychology was different, could be because they are being brought up in an environment where life did not show much mercy and procuring money was tough.

There was another group of people who enjoyed harassing people and used to draw pleasure out of this. Money and power are corrupt that I heard but this group made me an onlooker for the same. With time my knowledge about the world, circumstances, and situations is enhancing and it is a continuous process, I believe this is what we call maturity. My family atmosphere never inculcated the notion and concept to misuse the money for power. I observed every aspect of life from happiness to suffering of people.

Watch the happenings around the world on television, read in the newspaper, what chaos! Where are we heading? People are wealthy but do not have empathy, everyone seems to be in some rush, a haste to be wealthy, a haste to own all materialistic objects, and people are obsessed. Today, inhabitants want to earn and become rich, they do not believe in ethics, rather for them, any means will do; life is entirely different as compared to my childhood days! I remember, I enjoyed those peaceful moments when I was away from a such tussle for money.

Do people have time to enjoy, rest and think? What money is going to get them? I believe money cannot buy happiness. Money is the most imperative entity but it is not everything!  To keep pace with the augmented competition individuals are adopting diverse means, some may be ethical or time-consuming but honest ways while others could be unethical and provide them with the benefit before the ethical path. To keep abreast with the persisting trend numerous health hazards are also accompanied by enhanced monetary gains which could prove to be deleterious.  

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BRIEF RESEARCH REPORT article

Attitudes toward money and control strategies of financial behavior: a comparison between overindebted and non-overindebted consumers.

• 1 Universidade Católica Portuguesa, Católica Lisbon School of Business and Economics, Lisbon, Portugal
• 2 Faculdade de Psicologia, Universidade de Lisboa, Lisbon, Portugal
• 3 CICPSI, Faculdade de Psicologia, Universidade de Lisboa, Lisbon, Portugal

This paper addresses whether overindebted and non-overindebted consumers differ in their attitude toward money (specifically, the degree to which consumers care about money and feel difficulties keeping track of their money) and how this attitude impacts three different financial behavior categories: record keeping (e.g., recording spending in writing), adjusting balance (e.g., trying to find ways to decrease one’s expenses to match income), and monitoring balance (e.g., monitoring one’s spending to see if it is in line with what is expected). Overindebted consumers were recruited via an NGO for consumer defense and were categorized (whenever possible) into two subgroups: consumers who became overindebted due to internal causes (e.g., bad financial management) and consumers who became overindebted due to external causes (e.g., unemployment). Non-overindebted consumers were a convenience sample. Non-overindebted consumers showed more positive attitudes toward money than both groups of overindebted consumers and overindebted due to external causes showed more positive attitudes than overindebted consumers due to internal causes. All groups share similar financial management behaviors except for monitoring balance, which was more frequent among non-overindebted consumers. Furthermore, a regression analysis indicates that money attitudes helped explain financial behavior differences between consumers above and beyond their indebtedness status. Consumers’ attitude predicted financial behaviors, even when controlling for relevant socioeconomic variables (education, income, age, and gender). Further analyses comparing money attitudes and financial behavior for the three subgroups (non-overindebted, overindebted due to internal causes, and overindebted due to external causes) showed no differences.

Introduction

Contracting debt facilitates consumption and investments, contributing to growth and stability at a macro-economic level ( Ando and Modigliani, 1963 ; Modigliani, 1966 ; Fan et al., 1993 ; Hanna et al., 1995 ; Cecchetti et al., 2011 ). However, debt becomes worrisome to individuals and governments alike when it reaches such high levels that households become overindebted, that is, they begin to face recurrent hardships and are unable to meet their financial commitments ( Haas, 2006 ; D’Alessio and Iezzi, 2013 ).

Prior research has clearly shown that overindebtedness is a serious social problem with long term negative consequences for households’ life, including poorer health, anxiety and decreased well-being ( Norvilitis et al., 2003 ; O’Neill et al., 2006 ), self-control lapses ( Peltier et al., 2016 ), financial stress ( Xiao et al., 2006 ), increased feelings of failure ( Robb and Pinto, 2010 ), family conflict ( Bloom et al., 1985 ; Kerkmann et al., 2000 ), and divorce ( Dew, 2011 ). Unfortunately, household indebtedness levels have been rising since the 2008 economic World crisis ( Bover et al., 2016 ), with households carrying debt close to (and into) retirement ( Lusardi et al., 2018 ).

Among the common culprits of overindebtedness are external factors that include unexpected life events (e.g., unemployment; Canner et al., 1991 ; Niemi-Kiesiläinen, 2009 ), lack of acquired skills, such as financial literacy ( Norvilitis et al., 2006 ; Robb, 2011 ; Lusardi, 2012 , 2019 ; Lusardi and Tufano, 2015 ) often coupled with judgment biases stemming from heuristics (e.g., Thaler and Sunstein, 2008 ). Similarly, internal or individualistic factors, such as impulsivity and low self-control ( Baumeister et al., 2007 ) put consumers at higher risk of overindebtedness ( Ameriks et al., 2003 , 2007 ). Other research has suggested that lack of self-control is more a consequence than a cause of financial scarcity and overindebtedness. According to this account, being mentally preoccupied with making ends meet leads to cognitive depletion and emotional distress, which negatively impacts decision making, thereby leading to impulsive financial choices ( Mani et al., 2013 ). Given the large number of factores associated with overindebtedness (some times as causes other times as effects) it follows that the specific reasons why a household becomes overindebted must be considered for a comprehensive aproach of this problem (e.g., Ferreira et al., 2020 ).

This paper aims to contribute to better understanding the risk factors of overindebtedness by focusing on a relatively less investigated potential cause, namely consumers’ attitudes toward money (how much they care and keep track of their money) and three different categories of money management behavior (record keeping, adjusting balance, and monitoring balance). Moreover, in contrast to most studies, which usually assess how consumers’ attitudes impact debt in general, in this paper the attitudes and financial management behaviors of both overindebted and non-overindebted consumers are studied. This is a relevant categorization since amount of debt is not tantamount to being overindebted. Overindebtedness depends on the ratio between income and loan repayments.

Finally, in order to look for differences among distinct types of overindebtedness, the overindebted households who participated in our study were categorized (based on self-reported causes of indebtedness) in cases of overindebtedness that resulted from internal causes (e.g., bad financial management; low self-control) and cases that resulted from external causes (e.g., unemployment, salary cuts, sudden death in the family).

Money Attitudes

Different measures of money atttitudes have been developed through out the years. Yamauchi and Templer (1982) developed the first well-known money attitudes scale (MAS). Other important measures of money attitudes include Furnham’s (1984) Money Beliefs and Behavior Scale and Tang’s (1992) money ethic scale. Although with somewhat different factorial structures, which have evolved as more research with these and other attitude measures was done (e.g., Tang, 1993 , 1995 ; Roberts and Sepulveda, 1999 ; Klontz et al., 2011; Lay and Furnham , 2019 ), the most important dimensions that emerged from the different attitudes scales can be described in terms of the cognitive, affective, and behavioral components of the tripartite model of attitudes first proposed by Rosenberg and Hovland (1960 ; see also, Eagly and Chaiken, 1993 ; Chatterjee et al., 2018 ). For instance, the main dimensions of the MAS include (a) the perception of money as a source of freedom/power and achievement (cognitive component); (b) The association of money with financial planning and budget (behavior component); and (c) money as a source of distrust, suspicious and anxiety as well as protection from anxiety (affective component).

Since one of our main goals is to evaluate how money attitudes impact financial behaviors, the measure used herein focus on the behavioral component of these attitudes (i.e., how much consumers take care of and monitor their money) as the factor that may influence one or more of the three categories of financial behavior investigated. Indeed, although Rosenberg and Hovland (1960 ; see also Kaiser and Wilson, 2019 ) argued that the three components of attitudes correspond to manifestations of the same latent variable (i.e., attitudes toward money), the attitude’s behavioral component is likely to be a more direct indicator of related financial behaviors than the cognitive and affective components.

Money Attitudes, Financial Management Behavior, and Debt

Prior research on money attitudes suggests individuals demonstrate a variety of predisposed responses toward money. Money has different meanings and serves different purposes for different individuals, leading them to act differently toward it. Importantly for this research, attitudes regarding one’s actions toward money vary considerably as well, with some demonstrating ease in spending and accruing debt and others seeming more anxious and more devoted to saving money.

Money attitudes have been shown to have a significant positive impact on financial management behavior among young adults ( Qamar et al., 2016 ). In their study, Qamar et al. used a money attitude questionnaire that included measures of money avoidance, worship, status and vigilance ( Klontz et al., 2011 ) and found that 20.9% of the personal financial management behavior was explained by money attitudes.

Dowling et al. (2009) showed that financial management practices and money attitudes – measured in terms of (a) the importance ascribed to the ownership of material goods, (b) the extent to which one uses money as a standard of comparison with others; and (c) the extent to which individuals think and worry about money – predicted financial problems among young male Australian workers.

Similarly, Klontz and Britt (2012) showed that core attitudes and beliefs about money drive financial behaviors (see also Kahler and Fox, 2005 ). In their study three belief patterns (money avoidance, money status, and money worship) were not only associated with lower levels of total assets, lower earnings, and higher measures of revolving credit but could also foresee disordered money practices such as impulsive purchasing and financial dependence. In contrast, attitudes and convictions favoring money vigilance, including frugality, caution, and anxiety about money, appeared to be protective against poor finances and dangerous financial practices.

More recently, Sabri et al. (2020) , studied the determinants of employees’ financial well-being in Malaysia and found out that money attitudes, substantially contributed to employee’s fulfilment of current and ongoing financial obligations (above and beyond financial practices, self-efficacy, and emotional coping).

Money attitudes have also been shown to be a predictor of credit card debt. Specifically, the money attitude of effort/ability appears to play an important role (together with attitude toward credit) in distinguishing between more indebted students (with four or more credit cards) and less indebted ones (with one to three credit cards; Hayhoe et al., 1999 ). Likewise, good financial management practices (e.g., budgeting, saving, and regulating spending; see Godwin and Koonce, 1992 ) were also shown to be a main predictor of debt levels ( Lea et al., 1995 ; Donnelly et al., 2012 ; Ksendzova et al., 2017 ).

Taken together, these studies provide strong evidence concerning the impact of money attitudes on consumers’ financial behavior and show that both attitudes and financial behaviors are important predictors of indebtedness. However, in contrast with the present study, most extant research has not distinguished between overindebted and non-overindebted households and has not considered the possible differences (in terms of money attitudes, financial behaviors and their relation) between households who became overindebted due to internal (individualistic) versus external (situational) factors.

In the study here reported, we try to shed some light on these issues by assessing attitudes toward money of overindebted and non-overindebted consumers through its behavioral component (i.e., how much consumers take care and keep track of their money). Furthermore, consumers’ financial management behavior was assessed by means of a cash flow management scale ( Godwin and Koonce, 1992 ) that includes three different categories of behaviors: record keeping, adjusting balance, and monitoring balance.

Our main goals are to evaluate (a) how money attitudes and money management behaviors differ across non-overindebted and (two types of) overindebted participants; and (b) how our measure of money attitudes is related to consumers’ money management behaviors. In short, we aim to address whether overindebted and non-overindebted individuals differ in a behavioral component of money attitudes, and whether this impacts financial management behavior above and beyond consumers’ indebtedness status.

Participants

Our sample consisted of 365 overindebted and non-overindebted participants. Overindebted participants were consumers who sought assistance and counseling with DECO (a Portuguese NGO for consumer defense) throughout 2017 regarding their problem with overindebtedness. Non-overindebted participants were collected through convenience sampling and asked if they were in a situation of overindebtedness, in which case they were recoded as overindebted (six participants were recoded this way, amounting to 236 overindebted and 129 non-overindebted consumers in the final sample). Fifty-eight participants identified as male and 76 as female, the remainder of the sample did not answer. Participants’ mean age was 50 years (SD = 15.58), the majority (73.94%) did not have a degree and lived alone (30.58%) or with another person (34.17%). Their household mean income per capita (i.e., total income divided by number of people in the household) was 796,93€ (SD = 654.67). Additional information is presented on Table 1 .

Table 1. Socio-demographic characteristics of the two groups of overindebted and non-overindebted participants.

Overindebted participants responded to the questionnaire in either a paper and pencil format (those who went to DECO for a consultation) or in an editable computer file sent to them by mail (those who contacted DECO through their website or by email). Non-overindebted participants responded to the questionnaire in a paper and pencil format.

Participants answered socio-demographic questions (marital status, level of schooling, professional status, number of people in the household) and questions concerning economic aspects of their life (monthly income, monthly expenses, and credit product installments). Reported causes of overindebtedness were collected by DECO and for some participants we were able to pair this information with our data (using codes that allowed to guarantee consumers anonymity). Participants identified one or more causes for their overindebtedness situation from several pre-defined options. These causes were categorized into two groups: ‘‘Internal causes’’ and ‘‘External causes.’’ The first included participants that identified ‘‘poor money management’’ and ‘‘excessive use of credit’’ as causes. The second included participants that identified ‘‘salary cuts,’’ ‘‘unemployment (self or spouse),’’ ‘‘divorce,’’ ‘‘death in the family,’’ and ‘‘birth in the family’’ (among other external causes), as causes for their overindebtedness. From the original 236 overindebted participants, 95 reported external causes and 36 reported internal causes for their overindebtedness. For the remaining 105 participants we could not identify the overindebtedness causes because participants did not report them or because we were not given access to this information due to confidentiality issues 1 .

Money attitudes were measured by asking participants to “Please indicate your degree of agreement with the following affirmations” referring to two items originally used by Lea et al. (1993) , and obtaining the mean from both responses. The items used were “I am careless with money,” “I find it hard to keep track of my money” (Cronbach’s alpha 0.85). Participants responded to these items using a 5-point rating scale, from 1 ( Very strongly agree ) to 5 ( Very strongly disagree ). Money attitude was the mean between both responses. This measure was aimed at capturing the behavioral component of the multifaceted concept of money attitudes, which includes, in addition, a cognitive and an affective component (according to the tripartite model; Rosenberg and Hovland, 1960 ; Chatterjee et al., 2018 ).

Financial management behaviors were measured with 11 items taken from the Cash Flow Management scale described in Godwin and Koonce (1992) to which participants responded, using a 5-point scale from 1 ( Never ) to 5 ( Always ), to the question “Please indicate how often do you:” followed by the 11 items. A principal components analysis using the full sample yielded three components. The first component, with an eigenvalue of 5.56 and a Cronbach alpha of 0.89, was named “Record keeping” and includes the following financial behaviors: “Recording in writing most spending,” “Recording in writing your actual income,” “Assessing the amount of money spent on fixed expenses (rent, car, and payments, etc.),” “Assessing total expenses,” and “Assessing the amount of money spent on flexible expenses (food, clothing, and recreation, etc.).” The second component, with an eigenvalue of 1.26 and a Cronbach alpha of 0.70, was named “Adjusting balance,” and includes the following financial behaviors: “Thinking of ways to increase your income to match your needs” and “Try to think of ways to decrease your expenses to match your income.” The third component, with an eigenvalue of 1.02, and a Cronbach alpha of 0.78, was named “Monitoring balance” and includes the following behaviors: “Monitoring your spending to see if it is within your income,” “Monitoring your spending to see if it is in line with what you expected,”, Assessing the amount of money you can use during an emergency” and “Assessing the value of things you own.” Components values were the mean responses to their respective items. Money attitudes were measured prior to financial management behaviors. Finally, the questionnaire also included other measures collected for different research purposes, namely on the perceived causes of over-indebtedness causes, sleep quality, perceived health, feelings and locus of control, life satisfaction, financial satisfaction, well-being, and attitudes toward poverty.

Table 1 presents a comparative analysis of the main socio-demographic features of overindebted and non-overindebted consumers. Since overindebtedness is often related to low educational levels and income ( Mandell, 1973 ; Chien and Devaney, 2001 ), and given that the two groups in our sample differed in education and income, in the data analyses presented below, we statistically controlled for the impact of these two variables on the relevant dependent measures (money attitudes and money management behaviors).

A one-way analysis of covariance (ANCOVA) was performed with three levels of indebtedness status (overindebted as the result of internal causes; overindebted as the result of external causes; non-overindebted) as a between-participants factor and household income per capita and level of schooling as covariates. A main effect of indebtedness status, F (1, 198) = 16.54, p < 0.001, η p 2 = 0.14, showed that non-overindebted participants have more positive attitudes toward money (i.e., a disposition to care and monitor their money; M = 4.29; SE = 0.29) than participants overindebted by external causes ( M = 3.87; SE = 0.14), F (1, 198) = 2.38, p < 0.001, η p 2 = 0.01, which in turn showed more positive attitudes than overindebted participants due to internal causes ( M = 2.53, SE = 0.30), F (1, 198) = 1.92, p < 0.001, η p 2 = 0.01. No other effects were significant. A similar result is found when the analysis is performed without the covariates, F (1, 203) = 18.32, p < 0.001, η p 2 = 0.15.

In sum, non-overindebted consumers appear to show a positive attitude (as indicated by a mean response above the scale mid-point), consumers who become overindebted due to external factors showed weaker money attitudes (mean response close to the mid-point of the scale) and consumers who became overindebted due to internal factors showed the weakest money attitudes (below the mid-point of the scale).

Financial Management Behaviors

We performed a 3 indebtedness status (overindebted as the result of internal causes; overindebted as the result of external causes; non-overindebted) × 3 financial management behaviors (record keeping, adjusting balance, and monitoring balance) mixed measures ANCOVA with the first factor between-participants, the second within participants and household income per capita and level of schooling as covariates.

The analysis yielded a main effect of financial behaviors, F (2, 400) = 14.26, p < 0.001, η p 2 = 0.07. Adjusting balance was the more frequently reported behavior ( M = 3.83, SE = 0.18), followed by monitoring balance ( M = 3.16, SE = 0.18), and record keeping ( M = 3.08, SE = 0.18). Post hoc comparisons (with a Bonferroni correction) revealed that while levels of monitoring balance and record keeping were not significantly different, both were significantly lower than adjusting balance ( p s < 0.001).

There was also a significant interaction between overindebtedness status and financial management behaviors, F (4, 400) = 10.44, p < 0.001, η p 2 = 0.09. Planned comparisons showed that this effect was driven by significant differences in monitoring balance, F (2, 200) = 12.29, p < 0.001, η p 2 = 0.11, with non-overindebted participants reporting higher levels of monitoring balance ( M = 3.81, SE = 0.09) than participants overindebted due to internal ( M = 2.88, SE = 0.21), F (1, 200) = 2.02, p < 0.001, η p 2 = 0.01 and external causes ( M = 3.21, SE = 0.12), F (1, 200) = 1.94, p < 0.001, η p 2 = 0.01. No other comparisons between conditions reached significance (all p s > 0.05).

Finally, there was a significant interaction between household income per capita and financial management behaviors, F (2, 400) = 3.25, p = 0.040, η p 2 = 0.02, such that higher household income predicts less financial behaviors of adjusting balance (β = −0.145, p = 0.050). The same analysis without the covariates yields a similar result, with a significant main effect of financial behaviors, F (2, 430) = 56.03, p < 0.001, η p 2 = 0.21, and a significant interaction between financial behaviors and overindebtedness status, F (4, 430) = p < 0.001, η p 2 = 0.13 ( Figure 1 ).

Figure 1. Mean reported frequency of financial management behaviors for participants overindebted as the result of internal and external causes and non-overindebted participants (1 – Never ; 5 – Always ).

In sum, although the frequency with which consumers adopted different kinds of financial management behaviors varies, we found no differences in the reported frequency of financial behaviors between consumers overindebted due to external and internal causes, and non-overindebted consumers, except for the monitoring balance behaviors. Overindebted consumers, regardless of the reported causes, engage significantly less in these kinds of behaviors than non-overindebted consumers. Therefore, monitoring balance behaviors (i.e., continuous monitoring of actual and future expenses in relation to one’s own income or wealth) appears to be associated with keeping expenses and debt service within manageable levels.

Relationship Between Money Attitudes and Financial Management Behaviors

In line with previous analyses, zero-order correlations (see Table 2 ) show that indebtedness status (not being overindebted was coded 0 and being overindebted was coded 1) is associated with weaker money attitudes and poor monitoring balance. Naturally, overindebted consumers are also associated with larger debt-to-income ratios. Money attitudes are positively correlated with all measures of financial behaviors. In other words, higher levels of money attitudes are associated with better money management. The three measures of financial management behaviors are positively correlated with each other. Finally, money attitudes are negatively associated to debt-to-income ratio.

Table 2. Correlations between overindebtedness status, money attitudes, financial management behaviors, and debt-to-income ratio ( N = 152).

To further explore the relationship between our measure of the behavioral component of money attitudes and financial management behaviors, a multiple regression analysis was conducted to test the predictive role of overindebtedness and money attitudes (i.e., a disposition to care and monitor their money) on record keeping, adjusting balance, and monitoring balance behaviors, controlling for household income per capita and education level, using MPlus 7.2 ( Muthén and Muthén, 1998–2012 ). Based on the results of the previous analyses, significant correlations between predictors and between criterion variables were included in the model. To evaluate model fit, the following indexes and criteria were used: the comparative fit index (CFI) above 0.95, the root mean square error of approximation (RMSEA), and the standardized root mean residual (SRMR) below 0.08, all indicative of a good fit ( Hu and Bentler, 1999 ; Kline, 2011 ).

The multiple regression model fit the data well: χ 2 (2) = 2.03, p = 0.36; CFI = 1.00; RMSEA = 0.01, 90% CI: 0.00, 0.10; SRMR = 0.02. As depicted in Figure 2 , results revealed that overindebtedness and money attitudes are negatively associated with each other, but both significantly predicted all three financial management behaviors analyzed. More specifically, both overindebtedness and money attitudes were associated with higher levels of record keeping ( B = 0.30, p = 0.023 / β = 0.13, p = 0.022 and B = 0.37, p < 0.001 / β = 0.39, p < 0.001, respectively), and adjusting balance ( B = 0.26, p = 0.019 / β = 0.14, p = 0.018 and B = 0.29, p < 0.001 / β = 0.36, p < 0.001, respectively). However, while money attitudes were also associated with higher levels of monitoring balance ( B = 0.43, p < 0.001 / β = 0.50, p < 0.001), overindebtedness was associated with lower levels of this financial management behavior ( B = −32, p = 0.003 / β = −0.16, p = 0.002). Regarding the covariates, household income per capita was associated with lower levels of adjusting balance behavior, while education level did not predict any of the financial management behaviors. The whole model, respectively, explained 15.5, 16.2, and 31.5% of the variance of record keeping, adjusting balance, and monitoring balance.

Figure 2. Model examining the predictive role of overindebtedness and money attitudes on financial management behaviors. * p < 0.05; ** p < 0.01; *** p < 0.001.

Next, to account for the different causes of overindebtedness, we once more divided the sample in three groups – (1) overindebted due to internal causes, (2) overindebted due to external causes, and (3) non-overindebted participants – and performed a multiple group analysis with AMOS (v. 26) to test if the model significantly differed between the three groups. An unconstrained multiple group model, with all paths allowed to be freely estimated across the three groups was compared to a model where all paths were constrained to be equivalent across groups. Results of this analysis revealed a non-significant chi-square difference between the unconstrained and the constrained models: Δχ 2 (18) = 23.36, p = 0.177, indicating that the model does not vary significantly between the three groups 2 . Descriptive statistics (means and standard deviations) of money attitudes and financial management behaviors by group are presented in Table 1 of the Supplementary Materials .

In addition, despite the high percentage of missing data on participants’ gender (63.3%), we analyzed the potential moderating role of gender in the proposed model, by performing another multi-group analysis with the sample for which this data was available, using AMOS (v. 26). An unconstrained multi-group model, with all paths allowed to be freely estimated for both men and women was compared to a model where all paths were constrained to be equivalent for both groups. Results of this analysis also showed a non-significant chi-square difference between the unconstrained and the constrained models: Δχ 2 (9) = 7.86, p = 0.549, indicating that the model does not vary significantly between men and women. Descriptive statistics (means and standard deviations) of money attitudes and financial management behaviors by gender are presented in Table 2 of the Supplementary Materials .

At last, we also analyzed the potential moderating role of participants’ age in associations between money attitudes and the three financial management behaviors, using the PROCESS macro (v. 3) for SPSS Model 1 ( Hayes, 2018 ), controlling for indebtedness status, household income per capita, and education level. Results did not reveal a significant interaction between participants’ age and money attitudes. Thus, age was not a moderator of the hypothesized associations.

This paper explored whether overindebted and non-overindebted consumers differ in a measure of money attitudes (the disposition to care for and monitor their money) and three types of financial management behaviors. Our findings indicate that non-overindebted consumers display stronger money attitudes than overindebted consumers. Moreover, consumers who became overindebted due to internal causes showed weaker attitudes (i.e., weaker dispositions to care/monitor their money) than consumers who became overindebted due to external causes. This suggests two ways by which overindebtedness may be related to our measure of attitudes toward money. In the case of overindebtedness due to internal causes, weak money attitudes are likely to work as a risk factor, whereas the relative weaker attitudes of consumers who became overindebted due to external factors (compared to non-overindebted consumers) are more likely to be a consequence of their life circumstances. We tried to find empirical support for the above by performing a multiple group analysis with the same three subgroups but the analysis revealed no significant differences. However, the fact that the reported causes of over indebtedness were missing for about 44% of the overindebted consumers greatly reduced the sample size we could use for this analysis and thus the ability to statistically discriminate between the subgroups. Future research with a larger sample (and hopefully less missing data) is necessary to clarify this point.

In terms of financial management behaviors, overindebted consumers reported monitoring their balance (of expenses versus income) more seldom than non-overindebted consumers. In contrast, both groups report engaging in the remaining financial behaviors (record keeping and adjusting balance) with the same frequency. These two money management behaviors appear, thus, to be poor candidates to distinguish one group from the other.

We also explored the impact of indebtedness status and money attitude on the three categories of financial management behaviors (record keeping, adjusting balance, and monitoring balance) in a regression analysis, while controlling for income and education. Overindebtedness was positively associated with record keeping and adjusting balance behaviors while negatively associated with money attitude. In other words, overindebted consumers (compared to their non-overindebted counterparts) show a stronger tendency to record their fixed (e.g., rent payments) and flexible expenses (e.g., clothing, recreation) in writing, as well as their actual income. Overindebted consumers also engage more often in thinking of ways to increase their income (to match their needs) and decrease their expenses (to match their income). In contrast, they engage in less monitoring of their actual expenses (i.e., checking if they were in line with what was expected), they less often assess the money they could use during an emergency as well as the value of the things they own. The financial difficulties stemming from overindebtedness may be seen as creating the need for more systematic behaviors of record keeping and adjusting balance while reducing consumers’ ability and/or opportunity to engage in monitoring balance. On the other hand, consumers’ attitudes toward money appears to increase their engagement in all three categories of money management behaviors, above and beyond their indebtedness status.

In sum, overindebtedness and money attitudes are both positively associated with record keeping and adjusting balance behaviors. Perhaps consumers engage in more of these two types of financial behaviors either due to the fact that they become overindebted, that they have stronger money attitudes (i.e., disposition to care for their money), or both. In contrast, overindebtedness and money attitudes have opposite effects on monitoring balance: overindebted consumers and consumers with weaker money attitudes show fewer monitoring balance behaviors. This type of money management behavior is more oriented to preventing future financial difficulties as they focus on comparing current and expected expenses, money to be used in emergencies, and on evaluating one’s belongings (which may be seen as a way of obtaining cash, if need be). While consumers with weaker money attitudes may engage less in these types of behaviors due to feebler dispositions to care for their money, overindebted consumers may do so as the result of their difficult financial circumstances. Indeed, the expenses of overindebted consumers are more likely to be systematically above what they should be, they are seldom able to consider saving money for emergencies, and their belongings with financial value are often pledged. Lower levels of account balance monitoring displayed by overindebted consumers could reflect higher present bias, which has been documented in individuals facing financial difficulties, and hinders their capacity to improve their situation ( Mullainathan and Shafir, 2013 ).

Taken together, the results of this study allow the following conclusions to be drawn: (a) our measure of money attitudes and monitoring balance discriminate between overindebted and non-overindebted consumers; and (b) non-overindebted consumers and consumers with stronger money attitudes (regardless of whether they are overindebted or not) tend to more often engage in monitoring balance.

Almenberg et al. (2018) showed that debt attitude, more specifically discomfort with debt, was associated with lower debt levels. They suggested that such discomfort may act as a self-imposed borrowing constraint stemming from social norms. Our study adds to this previous result by showing an association between money attitude and consumers debt. Consumers with weaker money attitudes tended to have higher debt to income ratios [one of the debt indicators also used by Almenberg et al. (2018) ].

In addition, the negative association that emerged in the present study between money attitudes and indebtedness status – non-overindebted consumers tend to show stronger money attitudes than overindebted ones – suggests that lower levels of positive attitudes toward money may work as a relevant risk factor of overindebtedness.

Limitations and Social Implications

Money attitudes have a multifaceted nature with different dimensions (e.g., Yamauchi and Templer, 1982 ), which according to the tripartite model of attitudes ( Rosenberg and Hovland, 1960 ; Chatterjee et al., 2018 ), may be classified in three components (or indicators): a cognitive (e.g., money as achievement), an affective (money as a source of anxiety), and a behavioral component (budget and money monitoring). However, research using different measures of money attitudes, such as Yamauchi and Templer’s (1982) MAS, and Furnham’s (1984) Money Beliefs and Behavior Scale, often ignore these instruments multifactorial dimensions and use a money attitude index across all (or part of the) scales items (e.g., Qamar et al., 2016 ; Sabri et al., 2020 ). In our case, the money attitude measure only tapped the behavioral component of this attitude and included only two items. Although single-item measures have been used before to assess similar concepts (e.g., Almenberg et al., 2018 measured attitudes toward debt by asking one simple question “do you feel uncomfortable with having debt?”), these are important limitations of the present study that should be addressed in future research by using multidimensional measures to assess the three components of the money attitudes with multiple items per component. We speculate that the affective component of money attitudes, in particular, is likely to play an important role given that overindebtedness is often associated with depression, anxiety, and social stigma.

The correlational nature of the study reported herein, does not make it possible to ascertain causality. The causality issue is particularly troublesome for the regression analyses conducted to explore the relationship between our measure of money attitudes and financial management behaviors. Even so, given the more abstract nature of the attitude items and the more specific and concrete nature of the financial behavior items, having the former predicting the latter is in line with a considerable amount of literature on attitude-behavior consistency, according to which general predispositions or attitudes are used to predict behavior (e.g., Maio and Haddock, 2004 ; Fishbein and Ajzen, 2010 ). In other words, it appears to be theoretically sounder to consider and test the hypothesis that money attitudes predict engagement in specific money management behaviors, than the inverse: a specific financial behavior being the cause of a more general money-related attitude. Nevertheless, we acknowledge that it is not possible in the present study to fully disentangle the two causal directions. According to the self-determination theory (e.g., Bem, 1972 ), it might be the case that at least some consumers used their own financial behavior to infer their dispositions toward money (even if the money attitude measure was assessed before the financial management behaviors in our questionnaire). Regardless of which causal direction is dominant or stronger, the association between money attitudes and the three types of financial management behaviors suggests that interventions to improve one of them could have beneficial effects on the other.

Future research could use longitudinal designs (with at least two data collection waves) to measure the impact of debt-related attitudes on money management behavioral tasks, to more clearly ascertain causality.

Given the self-reported nature of our measures, response social desirability may have biased our results to a certain extent. Future research should thus replicate our findings using a paradigm more robust to social desirability bias, which can achieve considerable lengths in surveys on sensitive topics ( Tourangeau and Yan, 2007 ; Gittelman et al., 2015 ). This could be achieved via indirect or implicit indicators of attitudes and behaviors or more easily by including a scale to account for individual differences in social desirability responding, so that its effect can be statistically controlled for.

Finally, although we controlled for differences in level of education and income (and tested for the impact of age and gender in the regression model) between overindebted and non-overindebted consumers in our sample, it is always possible that the two groups differ in yet other variables (besides the indebtedness status). These other differences may have contributed to explaining the reported findings. In the same vein, as participants completed other questionnaires before responding to the measures used in the present paper, their influence on these measures cannot be excluded.

Standard theories of consumption such as the life cycle hypothesis assume that people plan ahead taking on debt based on expected future income when they are young and then save during middle age to maintain consumption level later in life ( Modigliani, 1966 ). In practice many consumers seem to deviate for these theoretical predictions when it comes to borrowing and saving. Factors that have been called upon to explain these discrepancies include variations in self-regulation and ego-depletion across individuals ( Baumeister and Vohs, 2007 ; Mullainathan and Shafir, 2013 ), financial illiteracy (e.g., Lusardi, 2012 ) and reasoning biases (e.g., Thaler and Sunstein, 2008 ). In this paper, we provide some evidence concerning the importance of an additional factor, money attitudes (here defined as consumers behavioral disposition to care and monitor their money). Specifically, the impact of money attitudes in consumers money management and borrowing behavior suggests that education programs that focus on reducing financial illiteracy (e.g., Lusardi, 2019 ) or heuristic-based errors and biases (e.g., Soll et al., 2013 ) may be beneficially complemented by interventions that could directly foster (a) social norms to care and monitoring one’s finances (see Moffitt, 2001 ); and (b) financial behaviors of monitoring balance (e.g., coaching people to anticipate and be prepared for financial emergencies).

Data Availability Statement

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

Ethics Statement

The studies involving human participants were reviewed and approved by Ethics committee of the Faculty of Psychology, University of Lisbon. The participants provided their written informed consent to participate in this study.

Author Contributions

FA, MF, and JS contributed equally to conceptualization, data collection, analysis, and manuscript writing. CS provided indispensable analysis and inputs on results and discussion. All authors read and approved the final version of this article.

This research was supported by a grant from the Foundation for Science and Technology attributed to MF, Grant PTDC/MHCPAP/1556/2014.

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.

Acknowledgments

We would like to thank Maria Manuela Calheiros for her valuable commentaries on the manuscript.

Supplementary Material

The Supplementary Material for this article can be found online at: https://www.frontiersin.org/articles/10.3389/fpsyg.2021.566594/full#supplementary-material

• ^ Because of this substantial increase in the missing data for the sample included in the analysis of money attitudes and financial management behaviors, we also performed ANCOVAs ignoring causes of overindebtedness, with the sample simply divided in overindebted and non-overindebted participants. These analyses and their results are described in the Supplementary Material . The pattern of results is similar to the one found when the causes of overindebtedness are taken into account.
• ^ Results of the multi-group analysis considering only the two groups of overindebted participants also showed that the model did not significantly differ between these groups, Δχ 2 (9) = 14.88, p = 0.094. That is, there is no moderating effect of cause of overindebtedness.

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Keywords : overindebtedness, financial behavior, money attitudes, debt, financial management

Citation: de Almeida F, Ferreira MB, Soro JC and Silva CS (2021) Attitudes Toward Money and Control Strategies of Financial Behavior: A Comparison Between Overindebted and Non-overindebted Consumers. Front. Psychol. 12:566594. doi: 10.3389/fpsyg.2021.566594

Received: 22 November 2020; Accepted: 24 March 2021; Published: 16 April 2021.

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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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Penny Pinchin' Mom

Unhealthy Money Attitudes (And How to Change Yours)

You must identify and understand your money attitude before you can make any financial changes.  Otherwise, you are destined to make the same mistakes time and time again.

There is a saying “Attitude is everything.”  I honestly believe that.  Your attitude towards every aspect of your life plays a vital role in how you think and act.  But did you know that your attitude can also affect the way you handle money?

Your money attitude is often the reason why you spend too much, are in debt, or fear your finances.  But, that doesn’t have to mean you can’t make a change.

Changing your financial outlook begins with your money attitude.  If you don’t first get to the root of your problem, you will be destined to make the same mistakes time and time again.

WHAT IS YOUR MONEY ATTITUDE?

There are four different money attitudes with which you may identify. And it is possible that you fall under more than one. However, when you ask yourself these questions, you should lean more towards one than the other.  Read these below to figure out which one you relate to.

You can use a checklist to help you better identify your attitude when it comes to your finances.  They will help you make the changes necessary to take control of your money.

If you adore money, it means you love to spend it. In many cases, you buy things (often on credit) just because you enjoy shopping. You don’t worry about the fact that you must pay for it later. You look at the credit card bill and focus only on the minimum payment.

Simply put, you love to spend money. That’s it.

Also see: How much is too much credit card debt

This attitude can be best described as “keeping up with the Joneses.” However, did you know that, in all likelihood, the Joneses are up to their eyeballs in debt? Why would you want to keep up with someone who lives their life that way?

The truth is, the Joneses are showing you what you want to see. For all you know, they fight over money every night. Their kids may resent their parents for pushing them too hard. You can’t judge a book by its cover, so don’t hold yourself to an idea about which you know very little.

If you feel you don’t deserve money, then this money attitude is yours.  It isn’t even just a feeling of not deserving money.  You may also feel anxious or stressed at the mere thought of money.  You don’t handle it well.

Avoidance is one of the most difficult attitudes to change. That doesn’t mean it is impossible. It means that you may have to work a bit harder to make it happen.

You might be careful with your money. Some may call you frugal. Others may call you a miser. Whatever the name, you need to learn to let go once in a while.

This cautious person refuses to spend money.  They are afraid to let it go and fear that it will be gone, never to return. When you are overly cautious with money, you risk opportunities.

CHANGE YOUR MONEY ATTITUDE

Now that you know which attitude you have, now is the time to make changes. It is something only you can do.  No one can do it for you.

IF YOU ARE ADORING

The first step in overcoming your love of money is to cut off its head. That means drastic changes.  You should cut up your credit cards . If they prompt you to spend without limit, then this is the first change you need to make.

If you like to spend your free time in the store, you’ll need to f ind new hobbies . Find something to do with the time you would usually spend walking the aisles hunting for the treasures you believe you need.

The final thing to do is to make a list of everything you love in this life. Don’t leave anything off of your list. Got it? Good. Now, go through the list and cross off everything that does not love you in return. You’ll notice that what remains are the people in your life (and maybe a pet). Those other things? They’re just things. They do not matter.

IF YOU ARE ENTITLED

To start, you have to determine why you feel the need to keep up with them. There could be a reason why you feel this way.

You may hate your job and use these things to compensate.  Low self-worth is another reason you buy items as you want to impress your friends.  It could even be that you had nothing growing up and feel you are due.  You owe it to that poor child.

If you use money to keep up with another individual, take a look at their life and determine what part of it intrigues you. He may have an amazing job that you would love to have; so maybe you should find one that makes you equally as happy.

You are only entitled to be happy and need to look at your life in that way.  Things won’t make you happy.

IF YOU AVOID MONEY

If you don’t feel you deserve money, you need to ask yourself one question: Why not? It could be due to things you’ve done in the past.

Whatever the reason, you need to know that everyone deserves to make money. You need it to survive. You don’t need more than you can handle, but you do need enough to support yourself and your family.

The truth is, avoiding your finances doesn’t make money issues go away. In fact, it makes them worse. For example, if you found a lump on your neck, would you avoid it and hope it went away? No. You’d go to the doctor to figure out what it was and then do whatever is needed to remove or treat it.

IF YOU ARE CAUTIOUS

When you refuse to spend money, you risk missing out on opportunities. What about that once-in-a-lifetime trip? You could miss the chance to go to dinner to meet the person of your dreams or make a key career connection. You don’t want to live your life with regrets.

I’m not saying to go crazy. I’m telling you that you need to give yourself permission to spend money.

When you set up your budget, just add an item that gives you permission to spend .  It will be OK. I promise.

IS YOUR MONEY ATTITUDE THAT IMPORTANT?

I have heard many people tell me that this really doesn’t matter as it doesn’t have that much bearing on your finances.  The truth is that it can control the way you look at money – even if you aren’t aware of it.

In 2002, when I declared bankruptcy, I never took the time to understand what led me down that path. Let me rephrase that. I never took the time to understand why I spent so much money and racked up that much debt.   I walked out of the courtroom that day, thinking I’d never make any mistakes with money again.  Boy, did I get that wrong!!

Around 18 months after that happened, I married the love of my life.  We didn’t go crazy spending money, but we did accumulate debt.  Here I was, a couple of years removed from the bankruptcy, and debt was building back up again.  Are you kidding me?!?!?

When my husband and I decided that we wanted to work ourselves out of debt, I felt the same way I had years earlier. I came to realize that I simply put a Band-Aid on an open wound when I declared bankruptcy. I never took the time to understand why I did this to myself.

It took a lot of soul-searching and understanding, but I figured it out. I had a mix of entitled and adoring attitudes. I never had money growing up.  When I became an adult, I thought I owed my younger self the opportunity to experience these things. This, in turn, led me to adore money.  I loved spending, and I loved getting things.

This time around, I did not have debt due to excessive purchases.  However, we had still overspent and were struggling to make ends meet.  When we both committed to making the change, we talked about money and the way it made us feel.

Together, I helped him with his money avoidance, and he helped me with my entitled attitudes.  It’s been more than seven years now that we’ve been debt-free.  It has a lot to do with understanding our money attitudes.

CAN YOU REALLY CHANGE YOUR MONEY ATTITUDE?

It will take some time to change the way you look at money and your money attitude. I promise that it won’t happen in one day. It may not even change next week. You may find it’s still the same three months from now.

The point is that you can now recognize your attitude and work with it. You’ll no longer fight your feelings about money. Instead, understanding the way you look at money – and the problems it creates – is a good thing.

Change cannot begin until you know what you need to change.No matter your attitude toward money, there are things that everyone needs to do:

• Determine your financial goals . Decide what’s important to you — and only you. Not the Joneses, not your childhood self. Once you know where you want to go, you can create a plan to turn your dreams and goals into reality.
• Figure out why you’re being held back. You have to understand why you feel the way you do about money. That allows you to move on to the final step.
• Make the changes needed to allow you to move forward. If you don’t change the way you look at money, you’ll never succeed in your financial reboot . You might have the right budget and financial plan, but if you don’t change how you deal with money on a fundamental level, you’ll continue to have financial failures over and over again.

Now that you know your money attitude and are ready to change it, you’re ready to move on to the fun part: the action plan for your budget, your debt, and beyond!

If you want to really take control of your finances, check out the Financial Reboot ebook .  It is a guide to help you not only identify your money attitude but create a budget, control your spending and change your financial future.

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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.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

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