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On assets and debt in the psychology of perceived wealth
Abigail B Sussman1, Eldar Shafir
1Department of Psychology, Green Hall, Princeton University, Princeton, NJ 08544, USA. asussman@princeton.edu
Abstract:
We studied the perception of wealth as a function of varying levels of assets and debt. We found that with total wealth held constant, people with positive net worth feel and are seen as wealthier when they have lower debt (despite having fewer assets). In contrast, people with equal but negative net worth feel and are considered wealthier when they have greater assets (despite having larger debt). This pattern persists in the perception of both the self and others. We explore consequences for the willingness to borrow and lend and briefly discuss the policy implications of these findings.
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