Leave money out

**It seems hard to imagine an economic transaction that doesn’t involve money. Sometimes, however, the negative impact of money in an exchange means we are better off without it.**

Why would this be the case? Take an example. A friend (Jonny), having just finished eating and feeling lazy, offers another friend (Luke) fifty pence in return for his washing-up services. The offer is refused, and received with some offence. Reconsidering, Jonny instead offers a Kit Kat for the same service, which Luke accepts before grabbing a sponge and whipping on the marigolds. Why, then, was the latter more than willing to wash up for a chocolate bar worth fifty pence at most, but irritated by the cash-in-hand offer?

The answer lies in the different way we view exchanges when money becomes involved. The offer of a Kit Kat is seen as a nice gesture by Jonny, showing his gratitude to Luke for helping him out; when 50p is offered, however, the feelings of gratitude and ‘wanting to help out’ are completely forgotten, and Luke instead sees the transaction as monetary, with the small amount of money not worth his time.

How exactly does money change our view of an exchange? Take volunteering as an example: the exchange of our time for no monetary reward. Many of us will have volunteered in some form or another during our time at Warwick, perhaps through helping out at a local primary school. Suppose that instead of volunteering, students were given the option of a small monetary return (say £2 hourly) for the same work. It would be fair to assume that the volunteers would accept this monetary return, giving up volunteering in favour of paid work. But this would be incorrect. Why though would heavily-indebted students turn their noses up at paid work, only to volunteer instead? Once the wage is introduced, students perceive themselves as players in the labour market, as opposed to people.

Due to the involvement of money, emotions are no longer significant, and maximising the utility gained from that job is all that is considered. They will make comparisons to other forms of work available to them before realising that the small amount of money isn’t worth their time. Contrast this to volunteering, where the feeling of wanting to help others is at the forefront of our intentions, and our willingness to help without charge is justified. It is the social rewards that motivate us to volunteer.

Due to this evidence of human behaviour, firms have, in recent times, tried to move away from their traditional portrayal as emotionless market contractors in an effort to establish social relationships with both employees and customers. Firms may offer employees a company car, free gym membership or life insurance on top of their salary as ‘perks’, in much the same way Jonny offered Luke the Kit Kat. Financial institutions, in particular, have made a surge to reverse their negative reception, using slogans such as ‘helpful banking’ and ‘on your side’, attempting to come across as a ‘friend’ to the customer, bringing emotion into the transaction.

But it is in these efforts that the danger lies; by creating these social relationships, firms are sacrificing their own ability to utilise the market as they see fit. If they were to renege, the relationship would be broken, leaving customers with the feeling that a friend has let them down. Customers feel betrayed when charged a heavy fine for slipping up on their overdraft payments, workers feel hard done by when denied extra time off work.

Ultimately, no matter how they may try to appear, banks are not a ‘friend’ to their customers. Their efforts to create social relationships are undermined by the presence of money; business can be harsh and, more often than not, money dominates the want to help each other out. In everyday life, however, if we recognise the impact that money can having in changing the view of transactions, then leaving money out of the equation sometimes is probably a good thing. With this in mind, let’s hope you didn’t forget to remove the price tags on those Valentine’s gifts.