Lay people’s and children’s theories of money

Abstract

Economics typically defines money in terms of a universal economic force that allows people to fulfil needs and purchase goods. In other words, money is perceived as nothing more than a means of exchange. Psychological science, on the other hand, shows that the lay person’s view of money is often far removed from economic assumptions. Money may be an end in itself, influencing the world of social relations as well as intrapersonal regulations. This chapter provides insight into our understanding of the psychology of money, by summarizing the current state of the literature on money and arguing that lay theories concerning its economic (instrumental) and psychological (symbolic) meaning go far beyond understanding money as a fungible, universal, economic force that simply allows people to purchase goods. It describes how lay people assign value to money, what the factors are that might affect these subjective valuations and how these processes are different from assumptions underlying economic models of money. It reviews studies of the symbolic, non-economic functions of money and provides insight into different methods of research, including non-conscious money priming and psychometric measurement of attitudes towards money. It presents classic and recent approaches to how children understand the instrumental and symbolic nature of money, and proposes that the former is based on cognitive development while the latter is associated with social learning. Finally, it offers several potential new directions for research in the field of the psychology of money and indicates some practical implications of the findings presented.