The title for this post comes from an article written by Rutger Bregman, author of the book, Utopia for Realists. The title of the article is “Why Do the Poor Make Such Poor Decisions?”
In many of the counties around the world, including the United States, there is an entrenched notion that poverty is something people have to overcome on their own.
But what if the poor aren’t actually able to help themselves?
Eldar Shafir, a psychologist at Princeton University. He and Sendhil Mullainathan, an economist at Harvard, recently published a revolutionary new theory on poverty.
Shafir’s interest is in the psychology of scarcity; people behave differently when they perceive a thing to be scarce. What that thing is doesn’t much matter; whether it’s too little time, money, friendship, food — it all contributes to a “scarcity mentality.”
“Scarcity consumes you,” Shafir explains. “You’re less able to focus on other things that are also important to you.” Poor people are not making dumb decisions because they are dumb, but because they’re living in a context in which anyone would make dumb decisions.
Shafir ran a research study in India that looked at sugarcane farmers. When it is time to harvest the sugarcane, the farmers are busy and have a good source of income. During the non-harvest, when there is little work to be had, the farmers are living in poverty. The researchers asked the farmers a series of cognitive questions; the same questions were asked in those months when the farmers were flush with cash, as well as in those months when they were living in poverty.
The results were that at the time when they were comparatively poor, the farmers scored substantially worse on the cognitive tests, not because they had become dumber people somehow — they were still the same Indian sugarcane farmers, after all — but purely and simply because their mental bandwidth was compromised, those in poverty are distracted and easily perturbed, leading to bad decisions.
Investments in education won’t really help these kids, the researchers say. They have to get above the poverty line first.
According to economist Matt Bruenig’s calculations, it would cost $175 billion to fight poverty. But poverty is even more expensive. A 2013 study estimated the costs of child poverty at as much as $500 billion a year. Kids who grow up poor end up with two years’ less education, work 450 fewer hours per year, and run three times the risk of bad health than those raised in families that are well off.
Shafir and Mullainathan have a few possible solutions up their sleeves: giving needy students a hand with all that financial aid paperwork, for instance, or providing pill boxes that light up to remind people to take their meds, or “simply” handing out money to those in poverty.
A study involving Cherokee Indians receiving annual payments of $6,000 from a casino showed that juvenile crime rates among the Cherokee declined, along with drug and alcohol use, while their school scores improved markedly.
In addition, the money helped ease the pressure on families, so the energy they’d spent worrying about money was now freed up for their children. And that helps parents be better parents.
So while on the surface just giving money to those in poverty may seem like a way to just enable those individuals, doing so has proven economic and psychological benefits.
I’ve written before about how childhood poverty, noting that measures of poverty having been growing in the U.S. for several years.
The story noted above, along with the studies cited, provides further evidence that poverty can be reduced. It just requires some cash to attack the problem.