Tuesday, January 6, 2015

How Culture Effects Our Money Habits



There's a psychological "game" out there called the ultimatum test.  The administrator gets two subjects.  They meet independently of each other, but both know the rules going in.  There will be $100.  The first subject decides how much they want to keep and how much they want to offer the other person.  The second subject then accepts the offer or rejects it.  If they reject it, neither party gets anything.

Previously, this test had only been administered to those from western culture.  A vast majority of the time, the first subject would offer a 50/50 split.  Why?  Because they didn't want to take less than half themselves, and if they were too greedy, the other party would reject the offer because they felt like they were getting snubbed.  Somehow the first subject tended to know that the second would feel that way.  They didn't want to screw the other one over and lose everything.

In 1995, however, an anthropology student went rogue.  He took the test to another culture.  There's a fascinating article about it here, but it is kind of long, so I'll sum it up for you.

The student, Joe Henrich, was doing graduate work among the Machiguenga people in Peru.  His curiosity got the best of him.  He wanted to see what happened when the Machiguenga played the ultimatum game. What happened was something completely different than what had happened in the western world. The first subject would offer a terrible split, keeping most of the money for themselves.  The second subject more often than not accepted.  Their thought process?  "Why would you turn away some money just so you could get back at the other person and get no money?"

Henrich had a hard time getting a job in anthropology after that test.  It was too invasive for the mainstream in the field.  Now he works in economics and psychology.  He has taken the test on the road, and gotten varied results at each of the different places he has run the experiment.

Notably, when he visited gift-giving cultures the split would often favor the second subject.  In these cultures, gifts are used to gain fealty or other obligations.  So when the second subject saw the large offer in front of them, they would often reject it, not wanting to be indebted to the first.

Our culture greatly influences our views on money.  Honestly, if I took the test I'd probably take the path of the Machiguenga, but I'd also be disappointed and likely hold a little grudge against the first subject once I found out who they were.  I'm not really proud of that, but it's the truth.

Additional ways culture effects our view on money are endless.  We keep up with the Joneses, often pushing us into debt.  We're more likely to feel uncomfortable negotiating, especially if we're women.  We tend to spend more on ourselves and invest less in our communities as individualism is rampant.  Western cultures also tend to have more of a short-term orientation as we place more value on the here and now than family honor and social obligations.  But these habits aren't inherent.  They're ingrained in us by the cultures we are raised in.  Recognizing the bad aspects of this concept can help us do some self-examination and change our monetary habits for the better.

What would you do if given the ultimatum test?  What ways has culture shaped your money habits, for the good and the bad?
Linking up with A Tray Of Bliss

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