Economics and the Social Meaning of Money

Economic analyses of household choices usually assume that money is fungible—that a dollar is a dollar, no matter how it was earned or by whom. But, in practice, families often earmark money earned by a particular family member or generated from a particular job. Viviana Zelizer’s The Social Meaning of Money thoroughly documents the importance of earmarking and the social relations that explain why and how. More recently, the US Financial Diaries project documents the frequency of earmarking in a sample of low- and moderate-income households in ten sites across America.   Earmarking income for particular purposes generally leads to spending patterns that deviate from patterns delivered by household-level optimization with full fungibility. Not surprisingly, economists have been slow to embrace notions of earmarking.  That, though, may be changing, as behavioral economics and game theory provide examples of how “anomalous” empirical results can open doors to the acceptance of richer theoretical approaches.