04.25.08

Money or Status

Posted in Behavior at 11:25 pm by justakim

Two recent studies look at how the brain reacts to monetay and status.

In the first, brain activity was tracked while volunteers played a game for monetary rewards and had their personalities given scores. The same portion of the brain reacted to both gains and losses of money and high and low evaluations.

This suggests that money and social standing are evaluated similarly, and can substitute for each other. However, it should be of little surprise that the same part of the brain that evaluates status also evaluates money. In the US culture in particular, status and money are very closely related. But money hasn’t been around forever… some part of the brain had to take on the task of handling it. This may explain why money equates so easily to social status; not just because we think of it in similar terms, but that the brain function that developed to measure social status took on the task of evaluating money.

The second study scanned brains while volunteers played a game for money. There was a fake ranking system and participants were told that their rank had no effect on the money reward but earning more money can raise their rank. During the game, they were told that fake contestants were doing better or worse than them. Brains apparently react very strongly to the status of other players.

So it seems like thinking that you are doing better than someone else has a stronger reaction than a monetary reward, even if it’s a complete stranger. A very cheap reward indeed.

What can economists gain from this? Perhaps a better understanding of money as possibly a subset of status, exploration of tradeoffs between monetary and social rewards, and a reminder that status and money are strongly correlated.

Environmentalists might gain new strategies from this way of thinking. They had it wrong with guilt; there may be more to Schwarzenegger’s model of making environmentalism attractive and a way to boost social status. Not only can raising one’s perceived social status be cheap for the individual, but environmental benefits from giving social rewards can be cost effective as well.

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