Beliefs about what spending means

A CHASM Seminar

Speaker: Dr Heather Kappes, Assistant Professor of Marketing, London School of Economics

Abstract

Lavish spending does not necessarily indicate that a person is wealthy; after all, people often spend beyond their means, leaving them financially vulnerable. Yet, it is common to believe that when someone spends lavishly, this is an accurate signal of his or her wealth. I describe this belief as reflecting a spending-implies-wealth (SIW) lay theory, and show that people who hold this lay theory are, on average, more financially vulnerable. I also provide insight into why this is so: people who believe that spending implies wealth spend their own money relatively lavishly in terms of both conspicuous and inconspicuous (private) consumption. I will present correlational evidence for these relationships using self-reported financial well-being, subjective ability to meet unexpected expenses, and objective financial transaction data, as well as an experiment which manipulates SIW lay theories and shows causal effects on lavish versus frugal spending intentions. Finally, I will present some ongoing research showing that as early as 4-5 years of age, children infer wealth from the mere act of spending money. These results complement previous research that has linked financial vulnerability to low self-control, by describing how underlying beliefs about the spending and wealth of others also influence who consumes beyond their means, and why.

About the speaker

Dr. Heather Kappes joined LSE in 2012 as Assistant Professor of Marketing. She has a PhD in Social Psychology from New York University, and takes a behavioural science approach to marketing, trying to understand what influences people as they pursue their goals (for instance, to run a race or to save money). Her current research looks at how adults and children think about wealth and spending, and how their beliefs predict their spending and financial resilience. 

Heather has a BS in Biopsychology from the University of California, Santa Barbara, and sometimes uses physiological measurements, like systolic blood pressure and heart rate variability, to help understand how people respond to different kinds of information and make decisions. These methods complement lab, online, and field experiments—supplemented occasionally with surveys and even qualitative data. She is also interested in ensuring the quality of research in psychology and related fields, and participated in the Reproducibility Project: Psychology and Many Labs projects as part of these efforts. 

If you would like to attend, please contact Helen Harris at h.m.a.harris@bham.ac.uk.