Money Doesn't Grow on Trees...Neither Do Ethics

Dr. Neeru Paharia, Assistant Professor of marketing at Georgetown University, recalls learning in an undergraduate economics course that people are basically rational—that, when making decisions, they go through a process of investigating their options and weighing them against personal preferences and other situational factors. But, Dr. Paharia says, there’s probably more to it than that. 

Consider the diamond. At our Summer Ethics Luncheon this week, Dr. Paharia posed the question to our audience: why and how did the diamond become the standard engagement stone? Is there anything “rational” about the decision to buy and gift a diamond to a person you want to marry? Sure, they’re beautiful, but there are lots of other precious stones that are just as appealing, not to mention much more affordable. 

Dr. Paharia argues that the case of the diamond indicates there are more complicated processes at work than rational decision-making when it comes to consumers’ buying choices. Instead, she says, products have psychological value—value that extends beyond the intrinsic worth of the product itself. And because the human brain is not always rational, that psychological value sometimes outweighs other considerations in our decision-making. 

This phenomenon may partially explain boycotts and their opposite, “buycotts.” “We enact our political will usually by voting or supporting different kinds of legislation and things like that,” Dr. Paharia said in a recent episode of NPR’s Hidden Brain. “So it’s kind of interesting when people start taking that civic action into the market and…boycotting a certain brand or a certain company in order to express their view.” The idea is that people can use their buying power to signal their beliefs and values; products are often purchased or avoided, then, based on the psychological value they add to a person’s identity, not just the quality of the product itself. 

If consumers use their money in part to express and defend their values, it would likely benefit companies to speak to those values. Companies can harness the power of “ethical buying” by voicing their organizational ethics publicly and strategically. Don’t know what your organizational ethics are? Not sure how to communicate them? The Alliance can help! Check out all our services, from custom consulting, educational workshops, and ethics products: