According to mainstream economics money shouldn't matter. Money serves several essential functions - as a means of exchange, unit of account, and store of value - but so long as it is organised properly it isn't supposed to really matter to the basic supply-demand relationship. Most economic models don't even include money. Mainstream economists think that welfare consists in the ability of people to get stuff they want (to fulfil their preferences). Of course they recognise that in practice people in actual markets do this by giving each other money tokens in some form, but that's just a detail, not the point of the relationship. Instead, economists focus on developing theories about how to maximise welfare, and then designing rules to make the theory come true.
What happens when money is itself the object of consumption is that people become systematically redirected from what economists think the efficient economy is supposed to be about - supplying goods to people at around the cost of production - to a status economy. This disrupts some basic economic principles because it shifts welfare from the absolute satisfaction of personal preferences to the relative satisfaction of social preferences. In the standard economy, everyone can be a winner (in fact, if transactions are voluntary, no one will ever be left worse off than they were before). But in a status economy people can only win if others lose, because success is relative.
One of the interesting consequences of this relates to satiability of the preference for money. Since economists think of money only in terms of its economic functions, they expect its value to agents to decline as their need for it declines - i.e. money has decreasing marginal utility. Because we want some things more than others, when we can buy those things we should care less about being able to buy things that are less important (the second house, third house, etc). In other words, if you have 10,000 dollars to spend you'll spend it on the stuff you really really need and get the most welfare from. The next 10,000 dollars will go on less important things, and so on until spending your millionth dollar makes almost no difference to how great your life is going. The rational economic agent will calculate how much she works in terms of the equilibrium between the disutility of working and the utility of spending the income she gets from working.
That's if we're living in the real economy - the one that economists think about - in which what people want is stuff. But if people are only interested in competing with each other - if they think the economy is a race - then they won't get welfare from stuff, but from their positional ranking in the pack. If for some reason people fixate on money as the measure of their relative status then they will have an insatiable demand for money itself, regardless of its real economic value to them. Many problems result
1. Economic value as personal desert.
Mainstream economics sees effective demand (under conditions of perfect competition) as a measure of the aggregate perceived value of what you're selling to society as a whole. Many people seem to think that this means that if you get lots of money, you therefore deserve it all. Yet in economic models 'profits' accruing to individual agents are signs of economic failure, not success. They are inversely proportional to the efficient functioning of the economic system. What producers 'deserve' in a perfectly competitive market is the bare minimum to cover costs of production. When CEOs or hedge fund managers boast of their mammoth bonuses year after year, from the economic perspective that suggests that that they're doing something deeply wrong, not something deeply right.
A focus on achieving personal wealth leads people to outsource their thinking about contributions to society to the economic system; to disparage the contributions of those, like sanitation workers, who earn less; to seek out and create market imperfections that allow the lucky few to reap rents from other people's productivity.
2. People will work much longer than they need to
Because people aren't being selfish consumers, but selfish status chasers, they will not stop working at the point that they can afford a comfortable life. Instead they will work longer if their neighbours work longer. What follows is the characteristic stressful modern life of restless anxiety.
3. People will spend on conspicuous consumption rather than what they really enjoy
If there is any kind of person more superficial than self-welfare maximising homo economicus, it is homo sociologicus. Conspicuous consumption focuses on things like cars (parked in the drive where the neighbours can see it), accessories like i-poddy things, Viking ranges, and so on. The actual utility of these goods is secondary to their function as displays of wealth itself. Things you actually enjoy doing, like going on holiday or spending time with friends will be neglected, despite your supposedly increased wealth.
The life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else. (Aristotle, Nicomachean Ethics)
To conclude, the pursuit of money for its own sake is, as Aristotle analysed, a great moral folly. It is just as ridiculous for people to use their income as a measure of their significance in the world.