The social meaning of financial wealth: Relational accounting in the context of 401(k) retirement accounts

Abstract

Behavioral economics has become a dominant set of theories in explaining economic behavior, yet such behavior remains under the limited purview of psychological, cognitive, or neural approaches. This article draws on and extends Viviana Zelizer’s social meaning of money framework in conjunction with new work in ‘relational accounting’ to suggest a sociological counterpoint, focusing in particular on the social and symbolic meaning attached to individual 401(k) retirement accounts. Following a market downturn, neoclassical and behavioral economics predict various types of behavioral responses, in particular loss aversion – where investors seek to increase risk-taking rather than locking in a sure loss (a loss is more painful to bear than an equivalent gain). A sociological theory that understands the shared meaning of retirement saving would predict something different, a behavior I call durable conservatism. In this article, I show how this concept better explains observed risk behavior in Americans’ 401(k) accounts following the 2002 and 2008 bear markets in stocks, and how that response differed from the behavior documented in non-retirement brokerage accounts.

Relational Work in the Economy

“…Quantitatively testing the power of relational accounting, Hayes (2019) found that those saving for retirement, a meaningful life stage, become very conservative with their retirement money following market losses. While behavioral economists would predict loss aversion, and thus investment choices to try to make up for losses, Hayes observed that individuals gravitate to durably conservative portfolios for their retirement investment, while at the same time leaving their ordinary investment accounts that do not contain the shared symbolic meaning of retirement exposed to far greater market risk.…”

The Behavioral Economics of Pierre Bourdieu

“…Indeed, other theoretical frameworks from sociology can shed light on certain findings from behavioral economics. For instance, Zelizer’s (2012) approach evinces a sociological counterpoint to “mental accounting” that is better explained through relational work and earmarking (Hayes 2019; Wherry 2016; cf. Thaler 1985).…”

The rise of market‐based “choice” programs: 100 years of social sorting in social welfare services

“…Consider the increasing importance of financial literacy and its effect on who has the wherewithal to navigate retirement programs efficiently (Bradley, 2021; Kline & Pais, 2021; Lusardi & Mitchell, 2007, 2017). From a social sorting perspective, financial literacy is more than a set of skills that can be developed and exercised independently from other stratification and relational processes (Hayes, 2019; Johnson & Sherraden, 2007). The ability to effectively use financial tools for saving and spending requires access to the routines, dispositions, and calculative logics of a socially constructed financial subject and opportunities to exercise those skills through access to financial instruments and services (A. Goldstein & Wharam, 2022; Johnson & Sherraden, 2007; Kline & Pais, 2021; Langley, 2008).…”