The super rich are getting even more super rich. According to a new Oxfam study, just 80 people control half the world’s wealth. So how much did folks like Warren Buffett, the Koch brothers, Bill Gates and the Walton family make in a single day?
The 40th president of the United States, Ronald Reagan famously stated in a piece in the New York Times in 1993,
“May I offer you the advice of the 14th century Arab historian Ibn Khaldun, who said: “At the beginning of the empire, the tax rates were low and the revenues were high. At the end of the empire, the tax rates were high and the revenues were low.”
And, no, I did not personally know Ibn Khaldun, although we may have had some friends in common!”1
Although one may agree or disagree with the conservative economic policies of Ronald Reagan, there is no denying the genius of the man he is quoting – Ibn Khaldun. He was centuries ahead of his time. His monumental work, the Muqaddimah, published in 1377, is hard to categorize. All at once it is a resource on history, Islam, science, sociology, economics, politics, warfare, and philosophy. One article on the entire book would be a disservice to Ibn Khaldun and the great amount of knowledge he left for subsequent generations. Instead, this article will focus only on some of his economic ideas, which centuries later form some of the basic ideas we use in government taxation today.
Money is packed with meaning, and it impacts our personalities, our relationships, and how we think. As you might imagine, a lot of stuff is going on in our brains when we think about money, and some of it is surprising. Researchers in the emerging field of neuroeconomics are drawing on psychology, neuroscience, and economics to give us picture of the human brain on money. Let’s take a look.
1. Money kills empathy.
According to research, money actually reduces empathy and compassion. One of the key ways humans feel empathy is through reading the facial expressions of other humans. Seeing that someone has a sad face triggers you to feel sad, too. But if you’re rich, not so much. Michael Kraus, the co-author of a study discussed in Time, told the magazine that people with fewer economic resources are conditioned to respond to numerous vulnerabilities and threats, which means they have to be more attuned to social cues. “You really need to depend on others so they will tell you if a social threat or opportunity is coming and that makes you more perceptive of emotions.” Rich people can just sail along without worrying about so many threats, so they tend to ignore how others feel.
Money also makes people behave more aggressively towards others. Even fake money can do it: in a UC Berkeley study, researchers watched two students playing Monopoly, one with much more Monopoly money than the other. At first, the inequality seemed to make the richer student uncomfortable, but soon enough the student with more money got aggressive, smacking his pieces around and taunting the impoverished player. Paul Piff and his fellow psychologists have consistently found that high socioeconomic status and interpersonal disregard are closely linked. So much for noblesse oblige.
2. Losing money hurts, literally.
The loss of money is known to share a similar psychological and physiological system with physical pain. Researchers have found that money is actually a pain buffer. In one experiment, participants were asked to rate their response to hot water after counting money. The more money counted, the less pain felt. On the other hand, people who had recently lost money rated the hot water as more painful. Research also reveals that the anticipation of pain heightens the desire for money.
People also hate losing money more than they love making it. Psychologist and Nobel laureate Daniel Kahneman has suggested this aversion to loss may have evolutionary roots. For the primitive human, threats or losses were a higher priority than opportunities, because an opportunity might come again, but a threat could be your last.
3. More money, fewer ethics.
Just thinking about money can cause you to behave unethically. Researchers from Harvard and the University of Utah found that people were more likely to lie and make immoral decisions after being exposed to money-related words. The mere exposure to the concept of money set off a “business decision frame” in study participants, causing them to think narrowly in terms of cost-benefit calculations and further their own interests without giving a damn about moral niceities.
Money makes you dangerous, too. Researchers at Berkeley observed crosswalks in San Francisco and found that people driving luxury cars were three times less likely than those in more modest vehicles to give the right away to pedestrians, and they were four times more likely to cut off other drivers.