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What’s the relationship between poverty and poor decision-making?

Grocery shopping in the produce aisleCreative Commons/Mary ThompsonCould it be that people of low income spend so much mental energy getting through each day that they have less capacity to deal with bigger issues that affect their lives?

Intriguing new research suggests a cause-and-effect relationship between poverty and poor decision-making.

And it’s not the connection you may think. So-called conventional wisdom, after all, has it that making poor decisions leads to reduced living circumstances.   

In contrast, the research reported in the journal Science suggests that “poverty itself” reduces cognitive capacity because “poverty-related concerns consume mental resources leaving less for other tasks.”

Could it be that people of low income spend so much mental energy getting through each day balancing life’s necessities against the weight of money problems that they have less capacity to deal with bigger issues that affect their lives – issues like work, education, parenting?  

Yes, suggest researchers at the University of Warwick in Coventry, England.

Consequences

The consequences are significant and measurable, they say.

From the The Guardian:  

The cognitive deficit of being preoccupied with money problems was equivalent to a loss of 13 IQ points, losing an entire night’s sleep or being a chronic alcoholic, according to the study. The authors say this could explain why poorer people are more likely to make mistakes or bad decisions that exacerbate their financial difficulties.

Yet there is hope of disrupting this cycle. Continuing with The Guardian:

Anandi Mani, [associate professor in economics and] a research fellow at the Centre for Competitive Advantage in the Global Economy at the University of Warwick, one of the four authors of the study, said the findings also suggest how small interventions or “nudges” at appropriate moments to help poor people access services and resources could help them break out of the poverty trap. Writing in the journal Science, Mani said that previous research has found that poor people use less preventive health care, do not stick to drug regimens, are tardier and less likely to keep appointments, are less productive workers, less attentive parents, and worse managers of their finances. “The question we therefore wanted to address is, is that a cause of poverty or a consequence of poverty?”

She said the team of researchers, which included economists and psychologists in the UK and the US, wanted to test a hypothesis: “The state of worrying where your next meal is going to come from — you have uncertain income or you have more expenses than you can manage and you have to juggle all these things and constantly being pre-occupied about putting out these fires — takes up so much of your mental bandwidth, that you have less in terms of cognitive capacity to deal with things which may not be as urgent as your immediate emergency, but which are, nevertheless, important for your benefit in the medium or longer term.””

The findings don’t surprise Nancy A. Heitzeg, sociology professor at St. Catherine University in St. Paul.

“I think poverty does have debilitating physical and mental effects,’’ she said, adding that she hopes the study can be used as a jumping-off point.

“Now that we have seen this research and we accept that as true, are we going to be able to turn to structural solutions for addressing this?’’  

In other words, she’s asking is there the will in this country to change social and political policies so that the United States provides adequate services — economic, housing, food — to “minimize” poverty?  

Two sets of studies

What researchers did was carry out two sets of studies, one at a shopping mall in New Jersey, the other among sugar-cane farmers in India.

At the mall, they approached about 400 people at random asking them to think about solving a hypothetical financial problem.

In an “easy” scenario, they needed a car repair that would cost $150, while in the “hard” scenario the repairs cost $1,500.

While thinking about the hypotheticals, the volunteers were tested with IQ-based puzzles and tasks measuring their attention.  

The results, as Matt Yglesias writes for Slate, are revealing:

Among Americans, they found that low-income people asked to ponder an expensive car repair did worse on cognitive-function tests than low-income people asked to consider cheaper repairs or than higher-income people faced with either scenario. To study the global poor, the researchers looked at performance on cognitive tests before and after the harvest among sugarcane farmers. ….. They found that the more secure postharvest farmers performed better than the more anxious preharvest ones.

The monetary affect on cognitive skills should factor in to our understanding of poverty.

Yglesias, a business and economics correspondent, sums it up this way:

Poor people — like all people — make some bad choices. There is some evidence that poor people make more of these bad choices than the average person. This evidence can easily lead to the blithe conclusion that bad choices, rather than economic conditions, are the cause of poverty. The new research shows that this is — at least to some extent — exactly backward. It’s poverty itself (perhaps mediated by the unusually severe forms of decision fatigue tha[t] can affect the poor) that undermines judgment and leads to poor decision-making.

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Comments (7)

  1. Submitted by Eric Paul Jacobsen on 09/18/2013 - 10:53 am.

    Truth About IQ Tests

    According to the article in the August 29th issue of THE GUARDIAN, the study of sugar cane farmers in Tamil Nadu demonstrates clearly that IQ can quickly change in one and the same group of people, along with their economic fortunes. This is another nail in the coffin of the old assumption that IQ tests measure exclusively innate and possibly race-related intellectual capacities, rather than developmental outcomes produced by a mixture of internal and external influences, including, as we must be aware now, the stress of poverty.

    Sadly, many US-Americans still believe that IQ tests work as originally advertised, as a yardstick of purely hereditary intelligence. Studies like the one done by the researchers at the University of Warwick should be better known. They are an indispensable antidote to both racial and class prejudice. Thank you, Cynthia Boyd, for publishing this article.

  2. Submitted by Kim Millman on 09/18/2013 - 01:37 pm.

    It is fairly simple

    Having some firsthand experience in poverty, I think it is a bit more simplistic than the study results appear to indicate. When you live in poverty for a long period of time, you lose the ability to think or plan in the long term because all of your time and energy is spent attempting to survive the day, the week or the month. It is like having a lens that is limited to seeing what is in directly front of you, but no ability to view the horizon within any type of focus.

    The problem with those that think they have all the solutions to the poverty problem is that they have never lived it and just don’t get it. Unless the “experts” have actually experienced living in poverty while being financially responsible for other human beings, their solutions are purely academic and most likely destine to fail. The solution to poverty is to address and remove the obstacles that prevent people from seeing the horizon in full view. In other words, people living in poverty need to have the ability to see beyond simply surviving. They need to have the ability to realistically plan and improve their circumstances for the future.

    Public policy makers can begin by removing employment obstacles, i.e., hiring criteria that discriminates disproportionately against those who live in poverty, including credit checks and education degrees that have little relation to the necessary job skills. Make college and vocational training truly affordable without significant debt. Create financial industry protections against predatory and exotic lending practices. Ensure all financial industry pricing is equitably related to the risk and not a vulture type profit center. Institute protections that prohibit corporate manipulation of the cost of life’s necessities including the fuel, financial and telecommunications industries.

    “Programs” are extremely overrated in ending poverty. It is time to look at the systemic problems that keep people in poverty.

  3. Submitted by Joe Musich on 09/18/2013 - 01:53 pm.

    So with education…

    all this information gets lost. Society or at least some of the bootstrapers bemoan the teaching and teachers. In other words public policy has returned to blaming the victims.

  4. Submitted by Rosalind Kohls on 09/18/2013 - 02:45 pm.

    The Great Depression

    This study doesn’t seem to square with what we know about the people who survived the Great Depression. They experienced poverty that was much worse than poverty in the US is today. I get the feeling the purpose of this study is to make people think the bad decisions poor people make today are really someone else’s fault.

  5. Submitted by Dennis Tester on 09/18/2013 - 02:48 pm.

    mmkay

    So if bad decisions don’t make you poor, being poor makes for bad decisions, then how does a person become poor in the first place?

    Forty-eight years and $12 trillion after LBJ launched his war on poverty, we have a higher rate of poverty now that we did then.

    I’ve known a lot of poor people. I grew up in St. Paul’s poorest neighborhoods in a family of American Indians. I know alot about poverty. I also know several people who were from the poorest families in our neighborhood who are now in the upper middleclass and a few who are actually wealthy.

    I can’t tell you how to get rich, but based on my observations, I can tell you how to ensure you will live your life in poverty.

    1. Quit school
    2. Become addicted to an intoxicating substance
    3. Have a baby before you get married
    4. Get married before you have a job
    5. Alienate your close relatives

    Making the right choices won’t guarantee you’ll be successful in life, but everybody I know who made it out of poverty made the decision to avoid doing these things. And it didn’t cost them or the government any money.

  6. Submitted by jody rooney on 09/18/2013 - 03:09 pm.

    I think the article is good – being poor and trying to survive

    is exhausting.

    I think Ms, Kohl’s observation needs a context reality check. This isn’t the same economy as the Great Depression. I don’t believe that the article suggested it was someone’s fault it is stating a relationship between mental fatigue and decision making.

    Mr. Tester is correct in identifying all the things that make life more challenging and could lead to poverty but that too is not related to the article, the article is about after you are in poverty.

    Mr. Tester simplistic approach doesn’t account for the problem that your close relatives may have been the folks that introduced you to addictive substances. But his view of poverty is based on experience in a neighborhood 50 years ago, again not he same economy.

    The research should ring true with everyone, make the $1500 a sum like $15,000 you might have a different response.

  7. Submitted by scott gibson on 09/18/2013 - 05:20 pm.

    In agreement, mostly

    Can’t say that I find myself agreeing with Mr. Tester often, but I can’t fault him here. I grew up on a poor reservation in northern MN. I’m not native American myself. Tt would be hard not to feel that personal choices, at least to some extent, have caused harm to many of the friends with whom I grew up. Strong families, however, can overcome some immense obstacles. I’ve seen that side of it, too.

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