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Thursday, October 13, 2011

Why pathological wealth addiction causes excessive income disparity

When wealth becomes an addiction it has social consequences. In 'The Psychology of Money', authors Adrian Furnham and Michael Argyle describe a term called 'Money Sanity'. In testing of subjects, research aimed to assess how different types of behaviors associated with money influence money sanity. A question discussed in the book is whether or not emotional issues become expressed through attitudes about money. This is a question also discussed by Eric J. Dammann Phd in Fortune magazine.

Money addiction
Psychological beliefs about money differ between individuals

According to the Fortune magazine publication, money is associated with psychological beliefs about what it can do.  For example, some believe money gives one control and others equate money with higher self-esteem. Moreover, Dammann states irrationality and learned behaviors can influence how money is used and the affects of channeling non-financial logic via money. On a mass scale, the suggestion is pandemic mis-management of money, potentially regardless of social class.

Another interesting connection supporting the psychological influence on financial beliefs is that between language and money. Moreover, according to the following video, how people understand concepts in terms of language affects how they spend their money. Thus, taking that one step further, and assuming the hypotheses is true, behavior, and therefore addictive behavior can be manipulated via language.

If the above psychological researchers are correct in their assessments, there is a notable possibility of emotional transference of individual psychology on to the use of and beliefs about money. Consequently, this could lead to excessive income disparity via money pathology or simply psychologically unhealthy money management. Since those with the most money are not immune from these psychological concerns, it would make sense to state the same issue in wealthy people would have a larger affect since their portion of total wealth is higher. 

To illustrate how pathological wealth addiction can cause income disparity suppose Person A makes $2.5 million per year and Person B makes $40,000 per year. Each have the same emotional issue and believe how much money they have in contrast to others primarily defines who they are as individuals. This belief transferred to money management could lead to behaviors such as hoarding money that's affect would be greater for the higher income individual. On a national scale, mass psychology of money management behavior could actually encourage income disparity to reinforce misconceptions about what wealth can do.

Image license: US-PD