Throughout the world, the poor face increasingly gruelling choices; whether to save for retirement or to send a kid to college, whether to buy that used car for basic transportation needs or to buy educational material for their children. In some cases the choice can be gut wrenching, deciding for instance whether to pay for your next meal or to get medical treatment for that broken arm. A recent study from Harvard, Princeton, British Columbia and Warwick published in Science suggests that while the poor may already be suffering from the difficulty of making tough economic choices, they may in fact be facing a double whammy in the form of having insufficient cognitive capability and self-control to make these choices. The study is important since it points to a vicious cycle - being poor can lead to cognitive deficits and poor choices, which in turn can accentuate poverty. It has significant policy implications in a world where income inequality is rampant and where those at the top increasingly rig the system to disadvantage ones at the bottom.
As the abstract and introduction make it clear, poverty already tracks with poor decision outcomes; everything from compliance with medication routines to filling out forms on time:
A variety of studies point to a correlation between poverty and counterproductive behavior. The poor use less preventive health care (1), fail to adhere to drug regimens (2), are tardier and less likely to keep appointments (3, 4), are less productive workers (5), less attentive parents (6), and worse managers of their finances (7–9). These behaviors are troubling in their own right, but they are particularly troubling because they can further deepen poverty.
What factors could be responsible for this behavior? External economic and social factors certainly play a role, but the study instead proposes that a diminishing of mental capacity might be disproportionately responsible. The authors ground their findings in well-known studies that demonstrate the phenomenon of will power depletion. The psychologist Roy Baumeister has written a book showing how will power and determination can be a limited resource which typically gets exhausted by factors like poor nutrition and mental exertion. The present authors' conclusion is simple; in facing tougher economic and other choices, the poor's will power gets exhausted far more than the rich's. This sets them up for a descent into even deeper poverty, setting off a tortured feedback loop.
To investigate this phenomenon the authors performed two very different but complementary experiments. In one study they targeted shoppers at a New Jersey mall with median household income levels ranging from $70,000 to $20,000, with the lower number representing the bottom one-third of American household incomes. They then gave these shoppers a series of hypothetical economic challenges which required them to make a difficult financial choice; for instance one of the questions asked them what they would do if they were facing an expensive repair job on their car. Would they pay all the money at once, would they pay it in installments or would they defer the repairs until later? In addition the economic challenges were classified as "hard" or "easy" depending on the amount that the participants had to spend on the repairs ($150 vs $1500). After asking the shoppers to mull over these scenarios, they were then given two standard cognitive tests. One was a test called the Raven matrix test in which participants have to pick a missing shape to fill in spatial gaps. The other test tested the ability to make quick decisions. Both tests were non-verbal and therefore did not depend on literacy or education levels.
The results were illuminating. While the performance of both the rich and the poor shoppers was almost the same based on the "easy" challenge, it was markedly different when preceded by the "hard" challenge. The implications are clear; the harder the economic decision (in terms of amount of money involved) the participants faced, the more they depleted their cognitive powers and the poorer they did on the tests. In keeping with this trend, people making six figure salaries will likely deplete even lesser cognitive resources.
The second experiment was very different and looked at a group of 150 farmers in the state of Tamil Nadu in India. The same two tests were administered to these people, controlling for confounding factors like stress levels (based on blood tests), and nutritional status. The tests were administered once before the harvest and once after the harvest. The assumption was that the farmers face much tougher choices before the harvest when crop yields and incomes are uncertain, but once the harvest comes in their choices are eased and become much simpler.
Again, the results mirrored those for the New Jersey shoppers. Before the harvest the farmers seemed to deplete their cognitive capabilities and performed poorly on the hard tasks in terms of accuracy, response times and error rate. After the harvest they got better. In addition, the researchers compared the poor performances of both groups with those of people who have lost a full night's sleep and found them to be similar. The conclusions thus reinforce the saying about losing a good night's sleep over financial problems.
This study has important policy implications, not the least of which is that government programs designed to help the poor need to either take advantage of the times when cognitive power is maximum, or otherwise need to "supply" the missing cognitive function that the poor need to tide over difficult economic choices. In this context, a social safety net in the form of welfare programs and social security is an important minimum provider of this cognitive deficit. Some of this cognitive shortfall can be compensated for by simple reforms, like having the poor fill in forms or sending them reminders about important loans or fees during the morning (when cognitive capability is high). Social programs can take advantage of the natural cycle of cognitive capability demonstrated in the case of the farmers, and can time their intervention accordingly; this is especially true in the aftermath of natural disasters like hurricanes when, plagued by physical and mental exhaustion, cognitive deficits are especially acute. And while the study does not mention this, I was reminded of other experiments demonstrating the positive effects of sugar boosts on decision-making capacity; thus, one solution could simply involve giving poor people access to cheap, sugar-rich foods like gummy bears while they are making difficult decisions.
In his book Development and Freedom, the Nobel Prize winning economist Amartya Sen described his important theory of "capacity". Sen's basic thesis was that simply providing opportunities to people is not enough since, for a variety of internal and external reasons, many people don't have the basic capacity to take advantage of these opportunities. This new study focuses on one of the most important of these capacities - inherent cognitive ability. It points out a serious vicious cycle that the poor face, depleting their cognitive power in making difficult decisions, thus leading to even worse economic circumstances that further drain their mental resources. The conclusion of the study is simple; due to their circumstances, the poor are simply less focused, more mentally exhausted, more lacking in self-control and less able to make decisions abetting their well-being. They need help.