The next time you hold a dollar in your hand, consider this: money is just paper. It has value because you believe it does. And so does everyone else reading this. But why do we believe in money and what purpose does that collective faith in money’s value serve? We asked Adam Waytz, a psychologist and assistant professor of management at Northwestern University’s Kellogg School of Management.
“As far as I can tell, money is a shared illusion,” says Waytz. “We have a lot beliefs in various systems, whether it’s the universe or government or organized religion, that serve more of an existential function to give us a sense that there is some order in the world.”
A big part of money’s function, says Waytz, is the ability to help us measure things in an understandable way.
“It makes things nicely quantifiable, which gives us a sense that we are living in a just and meaningful society,” he says. And recent studies have proved that money’s mere existence creates some interesting psychological effects.
“It makes us feel more independent, more self-sufficient,” Waytz says.
But money can make things messy, too. Waytz says: “What that does, at times, is it makes us become more selfish and less altruistic toward others. The other thing that money does is that it inherently changes the nature of social relationships. Money can actually lead us to view social relationships in free market terms, that people are sort of worth more or less than others. And what a lot of this research has shown is that putting social relationships or things that typically don’t have a monetary value in monetary terms is it corrupts those things.”
Waytz says that putting a dollar amount on social relationships and institutional ideas like friendships, marriage and spirituality leads us to think about things in terms of their market value rather than their social or moral worth.
Will our ideas about money change in the future? Waytz hopes so. He says as money continues to exacerabte inequality — giving only the wealthy the ability to access and influence certain aspects of life — people are going to have to address issues of fairness and corruption head on.
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