Motivation and emotion/Book/2019/Risk taking and emotion in financial markets/Motivations in finance

Physiological needs
The typical goal for investing in financial markets is to provide increased resources to satisfy the innate requirements of thirst, hunger and increased potential mating opportunities over time. Therefore, motivation to engage in financial activities is high (Taormina & Gao, 2013). Maslow (1943) framed this concept in his hierarchy of needs theory (Figure 2.). Where the first needs requiring satisfying are the physiological on Maslow's path to self-actualisation. Motivation to satisfy basic needs is important, and higher incomes report greater life evaluation, however something more is required for life satisfaction and emotional well-being (Kahneman & Deaton, 2010).

Psychological needs
If the satisfaction of physiological needs is not enough, what else motivates people to participate in financial markets? Self determination theory provides a framework to understanding behaviour of people in satisfying psychological needs (Figure. 3). The literature outlines outline the three primary psychological needs that motivate behaviour. (Gagne & Deci, 2005; Sheldon & Gunz, 2009)


 * Autonomy: The psychological need to experience self-direction and personal endorsement in the initiation and regulation of one's behaviour
 * Competence: The need to feel responsible for their successful performance in the environment
 * Relatedness: The need to create and maintain productive and positive relationships with others

Motivators
Psychological and physiological needs can be met by both external and internal factors. External factors that provide a reason to engage in an action from the environment are called extrinsic motivators, such as parents making a child clean the dishes. Internally generated motivational; forces are considered intrinsic motivations an example of which could be as a passion for hiking.

Extrinsic motivation
Finance by its very nature deals with extrinsic rewards. Money is an environmental incentive that motivates people to perform tasks they would otherwise not engage in. Cognitive evaluation theory is useful when considering how external rewards influence autonomy and loci of motivation (Benabou & Tirole, 2003). An example of an external regulation (Figure 4.) that influences financial behaviour under this theoretical model would be; "My parents told me I needed financial success in my future, therefore i need to save and invest for my future."

Intrinsic motivation
However as humans grow, a more self regulated and internal process for making financial decisions can develop (Vallerand, 1997). Financial decisions cannot be understood merely in the context of extrinsic motivation. Intrinsic motivations more adequately meet the psychological needs of autonomy, competence, and relatedness (Benabou & Tirole, 2003). Financial decisions are therefore motivated by the desire to fulfill our psychological needs. The ability to take control of ones life, be responsible, and maintain and enhance relationships are all facilitated by financial concerns (Mayall, 2010).

Implicit motives
Motives for financial investment also arise from three implicit socialised motives, the need for achievement, affiliation, and power (Vallerand, 1997). Financial success is tied with all three of these motives. Money is a marker for achievement. Money provides the ability to facilitate strong social bonds. Finally, as they say money is power. Needs theory (Figure 5.) outlines how these motives influence behaviour by deriving from experiences of the individuals culture (Sheldon & Gunz, 2009) and has been shown to correspond to physiology at the hormonal level (Schultheiss et al., 2004).