World 12 · Philosophy of money · Lesson 9 of 13

Why do humans link money and status?

From display to signalling: why wealth became one of the ways people rank each other.

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The idea

Humans are social animals who care about their standing in a group. In many societies, wealth has become one of the main ways standing is shown and judged. Thorstein Veblen, in The Theory of the Leisure Class, described “conspicuous consumption”: spending chosen partly because it displays wealth to others, and “conspicuous leisure”: showing that one does not need to work.

Economists later developed signalling theory: when qualities such as reliability or success are hard to observe directly, people use costly visible signals — clothes, cars, education, homes — to communicate them. Fred Hirsch, in Social Limits to Growth, described “positional goods”, whose value comes from being scarcer than what others have: the best address, the most exclusive school. If everyone becomes richer, positional goods do not become more available, because their value is relative.

This helps explain why wealthy societies do not feel as satisfied as their wealth suggests: when status is the goal, the race is relative, and it cannot be won by everyone at once.

Why it matters

Understanding why money and status are linked makes it easier to notice when you are spending on position rather than on your own life — and to decide whether that race is worth running.

A real example

The situation

In Elena’s neighbourhood, families spend more each year on children’s birthday parties, each slightly outdoing the last.

What happened

Elena and two other parents agree to hold simpler parties. The children enjoy them just as much, and several other families quietly follow.

The takeaway

The spending was a status race nobody had chosen; stepping out of it together was easy.

How people actually behave

People care strongly about relative position, so they will often choose to have more than others over having more in absolute terms.

Common mistakes

• Assuming status spending is only a problem for other people.
• Believing a positional race can be won permanently.
• Dismissing the real human need for respect and belonging behind status.

Different perspectives

Reasonable people disagree here. None of these is presented as the answer.

Status seeking is natural and useful

Some argue that the drive for status motivates effort and achievement, and that signals help people cooperate by revealing information about each other.

Status races are wasteful

Veblen, Hirsch and others argue that much status spending is a zero-sum competition that leaves people no better off while using resources that could serve other needs.

Questions to think about

• Which of your spending is partly about how others see you?
• Where could you get respect and belonging without spending?

Try it: Spot the race

1. Name one area where people around you seem to be competing through spending.
2. Ask whether you would spend the same if nobody could see.
3. Choose one area to step out of the race.