Dan Ariely: The Luxury Prime- How Luxury Changes People

Introduction  (Via Harvard)

Are people who travel in town cars and on corporate jets different—on a psychological level—from you and me? Does the availability of luxury goods “prime” individuals to be less concerned about or considerate toward others? The answer from new research seems to be yes.

HBS professor Roy Y.J. Chua and Xi Zou, an assistant professor at London Business School, suggest that luxury goods have an important effect on human behavior that is only now becoming clear—and that may have implications for addressing the continuation of objectionable choices among, for example, high-flying executives on Wall Street.

According to Chua, their research found that “people who were made to think about luxury prior to a decision-making task have a higher tendency to endorse self-interested decisions that might potentially harm others.” Their findings are detailed in the HBS working paper “The Devil Wears Prada? Effects of Exposure to Luxury Goods on Cognition and Decision Making” [Click Here For The Original Research PDF].

“Will the same business meeting reach different decisions when it is held at a luxury resort as opposed to a modest conference room?” the authors write. “Will CEOs who bequeath themselves expensive office facilities and luxurious corporate jets make different business decisions than those who do not? In this age of Wall Street excesses, these are pertinent questions that could further our understanding of why some [people] continue to place their own interests over others’, even in difficult economic times.”

Interesting Bits (Via Harvard)

Q: Did anything in your research surprise you?

A: The findings are not so much surprising as illuminating. We expected a relationship between luxury and self-interests. However, self-interested behaviors are often conflated with those that do harm to others (e.g., selling low-quality products that might be harmful to consumers). Our second study to some extent clarifies the psychological dynamics that arise from luxury.

Luxury does not necessarily induce one to do harm to others, but simply causes one to be less concerned or considerate toward them.

Q: How do your findings help us to understand corporate greed? Do you think there is a different mindset now for companies and executives to change and become more socially and morally responsible?

A: In the midst of the current global economic crisis, people are outraged by highly paid executives living in the lap of luxury while continuing to make self-serving decisions and ignoring the plight of others. To date, more than a year since the crisis started, despite much public outrage and threats to more strongly regulate the financial industry, there do not seem to be any substantive changes in their mindset. Bankers are still planning large bonuses for themselves.

Chua, whose research draws on human psychology to better understand important social processes in business organizations, explained more about the findings in an e-mail Q&A.

Click Here To Read: The ‘Luxury Prime’: How Luxury Changes People

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01. February 2010 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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