Effect of Status on Greed

Sins, also known as the Capital Vices or Cardinal Sins, have always been popular. However, the number seven and the dubious “deadly” have caused many speculations (Solomon, 1999 p.7 preface). Pope Gregory the First instituted the classic certification. His list of seven was confirmed and reasserted by Saint Thomas Aquinas and has been reproduced ever since. The list survived several centuries and now consists of the following seven sins: wrath, greed, sloth, pride, lust, envy and gluttony (Solomon, 1999 p.2).

Although The Seven Sins have long existed, a recent study concluded that The Sins are still encountered in our daily lives. Mainly because they are so deeply rooted in our human nature, that not only they are almost completely unavoidable but people can never seem to limit their selves (Frank, 2001). To reinforce these statements Frank used an example of sloth which is pretty recognizable. One fabulous late night with your family and there it is. At 07.00 a.m. your best friends presents itself, the alarm clock. Now, who doesn’t press the snooze button once or twice before dragging yourself out of bed? This is only a harmless example, but sins can also have more substantial consequences. Currently parliamentarians, journalists and prominent business men have been presenting greed as one of the main causes for the current credit crunch (Bernasek, 2010; Trouw: department Economics, 2009; Staps, 2008). Another study even argues that greed is the primary motivating factor behind civil wars (De Soysa, 2002).

Despite the fact that these unwanted situations, like credit crunch and civil wars, still tend to re-occur, relatively little time is devoted to this subject in academic research. Hereby one of my main questions is: why do people always want more? Because ultimately, humans are responsible for causing these unwanted situations. According to Wenzel (1968), greed arises due to the nature of earth. He stated that the earth is cold and dry and therefore people whom lack heat and humidity are exceedingly greedy. Though, also other definitions are known. When we take a look at ancient time, greed was known as a form of self-deception and it was mainly focused on material wealth (Wachtel, 2003). While for economists, greed is the engine of social progress and a form of enlightened self-interest (Wachtel, 2003).

In order to classify the many meanings of greed, the following definition will be utilized throughout this thesis. Greed is an excessive desire to acquire or possess more than one needs or deserves .

1.2 Problem statement

Wachtel’s psychoanalytic research (2003) is one of the few clues within the subject of greed. He tries to understand the difference between the individual who strives restlessly but does experience satisfactions and the individual for whom insatiability is a curse and where the desire for money and wealth is a hunger that cannot be slaked (Wachtel, 2003). According to his theory greed is only driven by the desire for material wealth and money but Frank (1999) concluded that “mutual influence” is another important dimension as well. Mutual influence means that our choices and purchases are influenced by neighbors and family (Frank, 1999). In order to explain this concept, Frank uses an example. He suggested to consider the perception of what “looks right” in clothing. Simply by living in the society, people come to have an automatic sense about how wide a jacket should be. But when fashion changes over time, their perception changes as well. Wachtel (2003) made a similar comparison. He said that the envy towards the bigger boat is not reduced by increasing the average size of the vessels. Because when all boats get larger, the average person’s assets still feels like “just a boat”.

So, apparently people continuously compare their possessions with others and seek for approval from family, friends and their environment. But why is “status” important for people? And what kind of effects does it have? In a ancient study, Veblen (1899) concluded that the concern for social status induces people to engage in conspicuous consumption only in order to signal wealth and there a more studies who concluded the same kind of thing. Similarly, Duesenberry (1949) argued that a concern for status causes people to imitate the consumption standard of those above them in the income hierarchy. But why is this “status thing” important? And what kind of effects does it have on greed? In hopes of finding, the problem definition is stated as follows:

What is the effect of status on greed?

1.3 Research questions

In order to answer the problem definition three research questions have been formulated:

What is greed?

What is status?

Does status influence greed?

1.4 Conceptual model

After the problem definition and the research questions the following conceptual model has been made:

Greed

Status

Status = One’s position in the world (De Botton, 2004).

Greed = An excessive desire to acquire or possess more than one needs.

1.5 Academic relevance

There have been several studies about The Seven Deadly Sins but only a few about greed (Frank, 2001; Solomon, 1999; Wenzel, 1968; Wachtel, 2003). However, there are studies about related topics such as conspicuous consumption, materialism and self-interest (Arrow & Dasgupta, 2009; De Botton, 2004; Khan, 2004; Krähmer, 2006; Frank, 1999; Rege, 2006; Richins, 1994; Rucker & Galinsky, 2009; Veblen, 1899). In none of these studies is “greed” linked to status. In my opinion status is a missing variable in the concept, which potentially could be the underlying motive for people to keep buying material goods. This makes the study academically relevant due to the fact that it will contribute to the further understanding of greed and the impact it has on consumer behavior.

1.6 Managerial relevance

This thesis attempts to contribute to the further understanding of greed. With this obtained knowledge it is possible to counteract unwanted developments caused by greed, such as a credit crunch or civil wars. It could also raise concern and put this subject on the agenda, in order to be able to protect consumers in the future.

2. Greed

As stressed before, this thesis attempts to approach greed by looking at related constructs such as self-interest, materialism and desire for money (e.g. Wachtel, 2003; Wenzel, 1968; Richins, 1994; Rege, 2006; Khan, 2004; Arrow & Dasgupta, 2009). The only ‘difficulty’ hereby is that in order to give an appropriate conclusion, all the constructs should be examined at the same level. Mainly, this thesis focuses at whether there is a relationship between greed and status. Status is therefore the main variable and research shows that this concept is relative (see Chapter 3). This implies that for consistency in this thesis, it is necessary to look at the related constructs -materialism, desire for money and self-interest- in both an absolute and relative way. Whereby, the absolute description accommodate the explanation of the construct and the relative description accommodate the link with status.

Now, in this chapter the three related constructs of greed will be discussed. Currently, it is assumed that these three constructs all together contribute to or cause greed. Therefore, these constructs will be aggregated in one chapter. After each chapter, a short conclusion is given for recapitulation and clarification.

2.1 Self-interest

Once, Aristotle wrote “the good man should be a lover of himself for he will both profit himself by doing noble acts and will benefit his fellows” (Aristotle, 1987). This statement implies that only if someone loves himself, he can help others. Striking hereby is that time changes values, opinions and assumptions because Paul, Miller and Paul (1997) concluded that the concern for one’s own interest is considered a nonmoral issue, while concern for the interest of others is considered obvious. Apparently, these days people are trying to find a proper balance between the pursuit of one’s own good and the good of others (Paul, Miller and Paul, 1997). However, the study of Paul et al. (1997) is in contradiction with recent findings. Van Dijk, De Cremer and Handgraaf (2004) claimed that in situations of social interdependence, people vary explicit in their expressions and acts. For example, some people seldom cooperate genuinely. They only help others at times when it strategically serves their self-interest (Van Dijk, De Cremer, & Handgraaf, 2004). Prolonged, De Cremer and Van Lange (2001) concluded that people who cooperate consistently tend to consider the impact of their behavior on others and exert more effort on behalf of the group (De Cremer & Van Lange, 2001). Hereby, a person’s social value orientation is a very important and underlying trigger.

2.1.1 Social value orientation

Social value orientation is defined as the individual difference in the way people evaluate outcomes for themselves and others (Messick & McClintock, 1968). A number of social values have been identified, but usually two opposing orientations are used namely a proself and prosocial orientation. Hereby, the proself is even further subdivided into individualist and competitive orientations ( Declerck & Bogaert, 2008; Knight & Dubro, 1984).

In 1978, Kelley and Thibaut presented an interdependence analysis about social value orientation. They concluded that the difference between prosocial and proself are partly caused by social interactions (Kelley & Thibaut, 1978). This is emphasized with the following practical examples. Firstly, the prosocials tend to maximize outcomes for both themselves and others. This is also evident in their behavior, because prosocials always try to minimize differences between outcomes for themselves and others (Van Lange, Otten, Bruin & Joireman, 1997). In contrast the proselfs tend to only maximize outcomes for themselves (Van Lange et al. 1997). Another important difference between prosocials and proselfs is known as the triangle hypothesis. Hereby, it is attempt to identify how these two groups view the social world (Iedema & Poppe, 1995). The hypothesis suggest that prosocials have a more heterogeneous view of the social world. They assume that others can have either the same or different social value orientation than their own. In contrast, proselfs tend to hold a more homogeneous view of others. They believe that all people have the same social value orientation namely proself. Therefore, the proselfs will make self-serving choices as they believe that the people in their environment will do the same (Iedema & Poppe, 1995).

This thesis particularly focuses on the relative share of the constructs. It may be concluded from the above text, that proselfs are more important for the study as prosocials because they are more individually oriented. Therefore, this subject is further explored in the upcoming paragraph.

2.1.2 Status and competitors

In theory, the proselfs are subdivided in two categories namely; individualists and competitors. The main difference between these two categories is that individualists tend to maximize their own outcomes with little or no regard for others’ outcomes. This while competitors tend to maximize their own outcomes in comparison to other’s outcomes (Van Lange, Otten, Bruin & Joireman, 1997). On basis of these definitions, it seems that competitors are more affiliated to status than individuals.

Van Lange, Otten, Bruin & Joireman (1997) stated that competitors are ultimately seeking for relative advantage over other people. Both Kuhlman & Marshello (1975) and Sattler & Kerr (1991) concluded the same thing as Van Lange et al. (1997). They stated that competitors are not willing to engage more in prosocial behavior. Not even if they could benefit themselves in the long run by doing so. They concluded that the responses by competitors can be selfishly understood in terms as the pursuit of relative advantage over others (Kuhlman & Marshello, 1975; Sattler & Kerr, 1991). Competitors also do not response to the well-being of others (Van Lange, Agnew, Harinck and Steemers, 1997). This appears from the fact that competitors are not interested in the long-term self interest. Therefore, they generally exhibit low levels of sacrifice. These human beings seem most concerned with not being exploited by their partners and they prefer outcomes that are superior to those of their environment ( Van Lange, Agnew, Harinck & Steemers, 1997).

2.1.3 Conclusion

Although there is not much known in literature, it seems that competitors have most affection with status. In order to substantiate this statement, we have to take a look at the given literature. Competitors are mainly focused on maximizing their own outcome relative to other’s outcome and they also are seeking advantage over others and preferring outcomes that are superior to them (Van Lange, Otten, Bruin & Joireman, 1997) . Hereby namely the part “maximizing their own outcome relative to other’s outcome” is decisive and related to status. Wachtel (2003) concluded that people experience envy when other people possess more. He also stated that this feeling does not vanish by simply buying the same things. Because when everybody possess the same, it still feels like “just things” (Wachtel, 2003). It seems that competitors –partly- experience these feelings. Because their main motivational reasons for behaving arises from the feeling of creating relative advantage over other people. Wearily is that this makes the construct never ending, because people will always continue to buy products, materials, houses etc. .

2.2 Materialism

The message we receive today is that the pursuit and possession of material goods, income and wealth is the route to increase our happiness and quality of life (Kashdan & Breen, 2007). Even self-identity can be defined by extrinsic possessions and consumption: “I am what I have and what I consume” (Fromm, 1976).

2.2.1 Possessions and the self

The term “materialism” has several definitions. Belk (1985) defines materialism as “the importance a consumer attached to worldly possessions” while Bredemeier and Toby (1960) refer to it as “the worship of things”. Additionally, materialistic people are characterized by their tendency to define their self-concept and successes in life by the quantity and quality of their extrinsic possessions (Kashdan & Breen, 2007). The premise that people regard their “possessions” as parts of ourselves is not new (Belk, 1988). William James (1890), laid the foundations for the modern conceptions of self. His definition is stated as follows:

“A man’s self is the sum total of all that he can call his, not only his body and his psychic powers, but his clothes and his house, his wife and children, his ancestors and friends, his reputation and works, his lands, and yacht and bank-account. All these things give him the same emotions. If they wax and prosper, he feels triumphant; if they dwindle and die away, he feels cast down,-not necessarily in the same degree for each thing, but in much the same way for all” (p. 291-292).

So, the self is not limited to external objects and personal possessions, but also includes persons, places and group possessions (Belk, 1988).

2.2.2 Materialism and money

Although materialist are believed to value possessions for a variety of reasons, money is the currency which enables one to acquire (Richins & Rudmin, 1994). Thus, one can expect materialistic people to have a different relationship with money as those who are low in materialism (Richins & Rudmin, 1994). One way they are expected to differ is in the amount of money they need or desire. Richins and Dawson (1992) found a strong relationship between materialism and desired income. The income that is necessary to satisfy the needs of materialistic person was about 50 percent higher than for those low in materialism. This due to the fact, that materialists view their possessions as indicators of their success in life. Therefore, they are more likely to spend their money in different ways than those low in materialism (Belk, 1985)

2.2.3 Status and materialism

People differ in the extent to which they interpret wealth as a sign of status (Lea & Webley, 2006). Fromm (1976) stated that for materialistic persons, their possessions are the center of their live. Their asset is everything, but it is not just about having the products. Richins and Dawson (1992) found a deeper motivational motive to induce in materialism. According to them, materialistic people measure their own success by especially the number and quality of possessions (Richins & Dawson, 1992). The same thing applies for people in their environment, because their degree of importance is judged on their asset (Richins & Dawson, 1992). Prolonged, other studies show the same kind of conclusions as well. Kashdan and Breen (2007) concluded that materialistic values were positively correlated with meaning in life, relatedness to others, feelings of competence and gratitude. This corresponds with the results of Kasser (2002). He concluded that a positive self-regard and self-acceptance is related to possessions, money, power and image. Thus, apparently people feel good when they possess much. But do people create these feelings purely for themselves? Wilson and Gilbert (2005) found that materialistic individuals are sensitive for other people’s opinion and attention. Prolonged, other studies show these results as well. Chang and Arkin (2002) concluded that there is a link between materialism and personal insecurity. Their study showed that self-doubt is a significant predictor of materialistic orientations. Now, it can be concluded that materialism is not only the desire to possess material goods. It is an outcome that is driven by personal insecurity, self-doubt and vulnerability (Chang & Arkin, 2002).

2.2.4 Conclusion

After the literature study, it seems that it could be concluded that materialism is linked to status as well. Materialistic persons vary from those who are low in materialism. The difference lies in the fact that materialistic persons value their possessions as everything (Fromm, 1976; Richins & Dawson, 1992). However, research showed that the motivational motives to induce in materialism are deeper than “just collecting stuff”. Motives are amongst others: personal insecurity, power, image and money (Chang & Arkin, 2002; Kasser, 2002). Literature also shows that materialists are sensitive for other people’s opinion and attention (Wilson & Gilbert, 2005). Thus, it could be possible to conclude that materialism is an outcome that is driven by personal insecurity, self-doubt, vulnerability, image and other people’s opinion and attention.

2.3 Desire for money

“Money, money, money. Must be funny. In the rich man’s world”. This is a phrase that is originally descent from a popular songs. The central stated subject is obviously money. But what does “must be funny in a rich man’s world” mean?

2.3.1 History of money

A long time ago, money as we know did not exist. Early humans moved from place to place, following the animals they hunted (Haydon, 2006). There were no shops or banks. Instead, people would exchange products and services for other products and serviced and they composed a “price” what they thought was a fair exchange of their products (Haydon, 2006). However, people began to prefer certain products for the bartering. So, over time people agreed on the value of these products and these products became the first types of money (Haydon, 2006).

Mishkin (1992) claimed that money has three primary functions. He said that:

Whether money is shells or rocks or gold or paper, in any

economy it has three primary functions: it is a medium of

exchange, a unit of account and a store of value. Of these

three functions, its function as a medium of exchange is what

distinguishes money from other assets such as stocks, bonds

or houses (p.21)

But also other descriptions are known. For example, Lea and Webley (2006) did an extensive research about money. Their research, money as a tool/ money as a drug, is one of the few studies where money is highlighted from different angles. The so called tool and drug theory (Lea & Webley, 2006).

2.3.2 Tool theory

Economists stated since the earliest days that when two people exchange scarce resources, the exchange can increase the wealth of both parties (Smith, 1776/1908). Money is the most efficient means yet discovered of making such exchanges possible (Lea & Webley, 2006). According to Tool Theory, it is only necessary to understand the psychology of money in a limited sense (Lea & Webley, 2006). What job does money fulfill? Because, obviously money is a tool only in a metaphorical sense. People are able to use money as a literal tool – as when they use a coin to undo the door lock or use a $100 bill to light a cigar (Lea & Webley, 2006).

However, the Tool Theory sees money as a means with only indirect value to secure other direct incentives. Hereby, it is concluded that money has three functions: it serves as a unit of account, a store of value, as well as a means of exchange (Lea & Webley, 2006).

2.3.3 Drug theory

Certain chemical substances, such as alcohol, nicotine and morphine can all become strong incentives. These products are strong motivators and are able to make a person addicted (Lea & Webley, 2006). But how is it possible that such addictions begin? The answer is short. It is able to arise because their incentive power does not depend on their ability to produce other goods and services. Instead they produce distinct physiological states in the brain (Lea & Webley, 2006). The same, in lesser extent, applies for money. The rapidly expanding research field of neuro-economics (Glimcher, 2003) has already shown through brain imaging studies that specific brain centers are activated in the presence of money. Hereby, Vohs, Mead and Goode (2006) suggested that thoughts of money activate feelings of self-sufficiency. For instance that money can solve problems and fulfill needs. As part of the drug theory, various studies show the same kind of theory. For example, it is stated that there is a possibility that money is used for purposes such as social display, social communication (Buchan, 1997) and social protection (Doyle, 1998). This merely extends the range of uses of money. Zhou, Vohs and Baumeister (2009) concluded that money can substitute for social popularity. Hereby it is stressed that money is an important marker of status in modern societies (Lea & Webley, 2006). To some extent money even serves as shorthand for general wealth, possessions, consumption and it is a statement of people’s wealth or income which all beam status. Thus, it is possible to conclude that money is used as an instrument to beam or obtain social status (Lea & Webley, 2006).

2.3.2 Money and relative award

As stated before, money is a medium which people need to trade for something else (Hsee, Li & Shen, 2009). Money also fulfills other jobs. It is possible to trade it for different goods and it could be saved for future use (Hsee et al., 2009). However, when money is an option, people tend to focus on its face value and overlook the ultimate goal (Hsee et al., 2009). Hsee et al. tested this assumption in their research. In a study with undergraduates students they tested the effect between relative award and cold-hard-cash. They stated that the participant of the study should choose between receiving 50 dollar and a movie-star kiss. The study revealed that 70% of the participants preferred the 50 dollar.

In contradiction, in another study Hsee, Yu, Zhang and Zhang (2003) asked the participants to choose between two tasks. One would award them with 60 points and the other with 100 points. Hereby, it was mentioned that the awarded points had no value. Only, 60 points would entitle the participants to a bucket of vanilla ice cream while 100 points would entitle them to an equal-sized bucket of pistachio ice cream. Most participants of the research chose the 100-point option, while they afterward overwhelmingly selected the vanilla taste. So, it is possible to conclude that the participants focused on the immediate reward instead of the option that would pay more points afterward (Hsee, Yu, Zhang & Zhang, 2003).

2.3.4 Conclusion

Vohs, Mead and Goode (2006) suggested that thoughts of money activate feelings of self-sufficiency. To some extent money serves as shorthand for general wealth, possessions and consumption. However, most importantly money is a tool for beaming people’s wealth or income (Vohs, Mead & Goode, 2006). It is also stated that there is a possibility that money is used for purposes such as social display, social communication (Buchan, 1997) and social protection (Doyle, 1998). Thus, it is used for several purposes and it seems that desire for money is a relative construct as well. Especially since it appears that it is a tool for beaming wealth, income and social display.

3. Status

Distinction and status are the stronger motivations of human behavior (Truyts, 2010). The importance of distinction as a fundamental dynamic was underlined by Darwin (1871). He introduced sexual selection as a second selection mechanism, where natural selection is the first selection. He concluded that in order to spread the population, people not only need to survive in their natural and social environment but they also need to be a more attractive partner than their same sex competitors (Truyts, 2010). This is also emphasized in more recent research. For example in sociology. Here Bourdieu (1979) pointed social distinction and status as a crucial dynamic of the social life.

3.1 Dependence

In traditional societies, high status may have been hard to acquire, but it was also hard to lose (De Botton, 2004). De Botton (2004) for example stated that someone cannot stop with being a lord, due to the fact that it is a title that has been given to you. What mattered was one’s identity at birth. In that time, people did not care about one’s achievement (De Botton, 2004). This in contradiction with the present time. De Botton (2004) stated that these days, status rarely depends on an unchangeable identity. It depends on someone’s performance within a fast-moving economy (De Botton, 2004). He also concluded that due to the nature of this economy, the most evident motive to achieve status is uncertainty. People hereby tend to look at the future in the acknowledgement that they for example could lack the needed talent (De Botton, 2004).

3.2 Social status

In order to understand social status, it is necessary to first define status. According to De Botton (2004) status is one’s position in the world. Hereby, the world refers to one’s legal or professional standing within a group (e.g. married). Solely, this is a more narrow sense of status. Because in a more broader and more important sense it means one’s value and importance in the eyes of the world (De Botton, 2004). The term social status is an enlargement of this theory. Weber (1922) defined social status as an effective claim to social esteem in terms of positive or negative privileges.

In his book, De Botton (2004) concluded that the consequences of high status are pleasant. It could include resources, freedom, space, comfort and, as importantly perhaps, a sense of being cared for and thought valuable through invitations, flattery, deference and attention (De Botton, 2004). So, the definition of status implies a hierarchy of rewards. Hereby, higher status have greater access to desirable things, such as appreciation (Griskevicius, Tybur & Van den Bergh, 2010). Sloman and Dunham (2004) stated that success also tends to increase the person’s self-confidence. This while repeated failure can undermine the person’s self-confidence (Sloman & Dunham, 2004).

3.4 Search for status

It is not surprising that people are looking for status, due to the fact that it has pleasant effects. In one of his studies, Wright (1994) refers to this as the “deeply human hunger for status”. According to him, people are always looking for achieving high status in society (Wright, 1994). But, how do people reach this coveted desire? Status can be achieved through several actions. De Botton (2004) stated that people could generate high status due to their importance, achievement and income. This is also emphasized in the study of Griskevicius, Tybur and Van den Bergh (2010). They stated that high status could be achieved through dominance or through prestige (Griskevicius et al., 2010). In an early work, Duesenberry (1949) concluded that eventually everyone is looking for status. For example, he stated that households not only care about their own consumption level, but also about their consumption level relative to those of other households in their environment (Leibenstein, 1950). According to De Botton (2004) and Duesenberry (1949) people only feel fortunate when they have as much or a little more than the people they grow up with, work alongside or have as a friend. For example, when all people are small, they will not be unduly troubled by questions of size (De Botton, 2004). But if others are taller, people are liable to feel sudden unease and will fall into dissatisfaction (De Botton, 2004). Thus it can be concluded that people only envy those who they feel their selves to be like. So apparently, people only envy members of their reference group (De Botton, 2004) and we continue compare ourselves with people around us (Duesenberry, 1949). This is also emphasized in literature while using experiments called “stated preference research”.

3.2 Stated preference

Stated preference research puts respondents before a hypothetical choice and asks them to state their preference for the option they believe would maximize their utility (Truyts, 2010). For example, Solnick and Hemenway (1998) asked their respondents to choose between two companies. A is the more relative company, in which the respondent is worse off in absolute terms but better off than the others. While B is the more absolute company, where one is better off in absolute terms but worse off than others. Solnick and Hemenway (1998) made the following distinction:

A: Your yearly income is $50,000; others earn $25,000

B: Your yearly income is $100,000; others earn $200,000

After the experiment, it could be concluded that for some goods, 80% of the respondents prefer the relative case A. The number of people choosing option A is highest for attractiveness and intelligence (Truyts, 2010). A similar experiment was attempted by Tversky and Griffin (1991). They let respondents choose between a job at a magazine. Hereby one earns at magazine C a salary of $35,000 and others $38,000. By magazine D one earns $33,000 and others $30,000. Tversky and Griffin report that 85% of the respondents prefer magazine C, but that in a second experiment 64% believe to be happier at magazine D. Hereby, an important difference between the two studies is that Solnick and Hemenway (1998) enclose all others while Tversky and Griffin (1991) only considered colleagues.

Part of the evidence above suggests that we enjoy status for the sake of status itself. So, social status can then be the ultimate motive for human actions (Truyts, 2010). As the studies showed, when applying for a job it is the relative rather than the absolute level that is decisive. But also the positions in social groups determine a range of socially goods. For examples friends, invitations, esteem and sympathy (Corneo & Jeanne, 1998; Truyts, 2010). People care about their relative standing for the sake of status itself and because high social status implies many material and non-material benefits (Truyts, 20