If you’ve found yourself getting caught up in the conversations about poverty and inequality spurred by the Baltimore demonstrations and riots, you should read this Harvard Magazine profile of the work of Sendhil Mullainathan, a behavioral economist there who studies the effects of scarcity on human decision-making.
Mullainathan and Eldar Shafir, a Princeton psychologist, are the co-authors of the excellent book Scarcity (which I reviewed back when it came out), and the Harvard piece, written by Cara Feinberg, does a really nice job summing up a lot of their research. Its basic thrust is that when we feel like we don’t have enough of something — money or time or affection or anything else — it affects our ability to make wise decisions and saps our cognitive capabilities in general. Rich people and poor people are both affected by this; the difference is that poor people face scarcity more often and have less of a margin for error in navigating it.
If you have money, paying your bills at the end of your month is annoying, but it doesn’t hover over your head like a storm cloud, sapping your cognitive bandwidth. If you don’t have money, it’s a different story. One of my favorite Mullainathan/Shafir studies demonstrating this took place, like so many important scientific investigations, in a Jersey shopping mall. It centered around an IQ test, but before the test was administered all the respondents were given a prompt that included a couple of questions:
Imagine you’ve got car trouble and repairs cost $300. Your auto insurance will cover half the cost. You need to decide whether to go ahead and get the car fixed, or take a chance and hope that it lasts for a while longer. How would you make this decision? Financially, would it be easy or hard?
“Rich” and “poor” participants — as defined by their self-reported income — did equally well on the IQ test. But then Mullainathan and Shafir bumped up the cost of the repair to the more imposing sum of $3,000. Suddenly the poor participants’ performance dipped 14 IQ points, or the equivalent of a slide from “superior” all the way to “average,” while the rich participants’ performance remained level. “Simply raising monetary concerns for the poor,” the authors explain in the paper, as quoted by Feinberg, “erodes cognitive performance even more than being seriously sleep deprived.”
This experiment nicely highlights one of the most important principles the duo keep in mind when they try to apply their work to the real world: The everyday stuff that can make life annoying affects the poor more than the rich. In other words, at some point or another, almost everyone has to deal with being overscheduled or getting something repaired or having a tedious commute to work or school. But if you have financial resources, you’ve got a lot more wiggle room — you can hire someone to watch your kids after work; you can afford to be late to a meeting once in a while without being fired. The mistakes everyone makes when their cognitive bandwidth is sapped by scarcity simply hit the poor harder.
What this means, in their view, is that people should stop treating poverty as a matter of personal failing, of poor values or morals. Rather, those trying to chip away at poverty should understand what scarcity does to the poor and how to fix it. A simple example from both Scarcity and Feinberg’s article: Poor people often have serious scheduling conflicts involving childcare and irregular work hours. So why would you set up a job-training program that requires them to be in the same place at the same time every week without missing a single session? If you instead build more flexibility into these programs, the researchers argue, you’ll increase completion rates.
It’s easier, of course, to simply deride poor people as lacking in the gumption or discipline required to show up in a classroom every week — and then, inevitably, question why these programs should be funded in the first place. But Mullainathan and Shafir are building an increasingly compelling case for why that this is exactly the wrong approach.