Debra McCown, Associated Press
People in poverty tend to make worse decisions than those who are not in poverty — they eat less healthy foods, have weaker relationships, and tend to be late for appointments. While it would be easy to conclude that making bad decisions is the root cause of poverty, new research is showing that poverty itself may cause poor decisions.
In a recent study published in the journal Science, researchers found that people who normally function at the same level of cognitive ability make worse decisions when money is tight. The number of decisions the poor have to make to get by exhausts a finite resource of mental power that all people have, according to Eldar Shafir, co-author of the Science study and Scarcity: Why Having Too Little Means So Much.
“It is well-known the poor are disadvantaged in many ways,” Shafir said. “They might look like they make worse decisions, but it doesn’t have to do with lower intelligence. For every person where lower intelligence leads to poverty, poverty causes people to act less smart."
And experts say that understanding the effect poverty can have on decision-making may lead to better ways to reduce its root causes.
Making poor decisions
In the study published in Science, the researchers looked at two very different sets of people — sugarcane farmers in rural India and mall-shoppers in New Jersey. In both cases, they found that the strain of poverty decreased performance on a set of mental reasoning tests.
In the study of Indian farmers, researchers knew the farmers received all of their income after harvest, meaning they experienced financial hardship pre-harvest and a relative boom post-harvest. When given intelligence tests, farmers performed better after the harvest than before.
In New Jersey, poor people and rich people were given different scenarios to fix a car, one where repairs would be inexpensive and one where that would cost much more. When the repairs were cheap, poor people and rich people performed similarly on the cognitive tests. But when they faced the expensive fix, poor people performed significantly worse on the tests than the rich.
From these case studies, researchers concluded that instead of poor people being less intelligent than rich people, it appears that “poverty itself reduces cognitive capacity” because the mental capacity needed to live in poverty actually uses up limited mental resources.
The findings of this study comport with other studies that have found that cognitive ability can be impaired when placed under intense strain. Kathleen Vohs, a professor at the Carlson School of Management at the University of Minnesota who holds a doctorate in psychological and brain sciences, said that research has shown mental capacity for decision-making and self-control are finite resources that can be depleted. That is, after being forced to use self-control, people are more likely to make intuitive, often regrettable, decisions like spending all their cash or overeating.
Therefore, people become worse at self-control the more they are forced to make decisions that require exercising restraint, explained Vohs. And people in poverty are forced to make decisions that require trade-offs — whether to pay an electric bill or buy groceries, for example — more often because of their lack of financial resources
“Linking this idea that poverty is difficult and taxing with this general model of self-control is hugely powerful,” Vohs said. “Now we better understand why people in poverty make bad decisions — why they are not able to eat healthy, get to jobs on time, have good interpersonal relationships — these are all things that use our self-control. We only have a finite amount of self-control and we know from the research that needs to be restored, but poor people are whittling it down and not able to replenish their energies.”