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.”
Limited mental bandwidth
The limited capacity the brain has to make hard decisions is different from the mental strain that comes with stress. Rather, Shafir analogized the ability to make good decisions to “bandwidth” — a limited resource that can be used up quickly. Shafir said that one of the most important things their study showed was that small impositions on bandwidth have big impact.
And the fact that the study found similar results in suburban New Jersey and rural India show that this drain on mental bandwidth was not merely a problem reserved for the poorest of the poor, Shafir added. “These (New Jersey mall-goers) are not people living in abject poverty, they are just having lot of budgetary tensions,” he said. “The load on cognitive function is not just affecting extremely poor people in exotic places. We’re talking about much of the middle and lower-middle class, and in that sense, we might capture 150 million Americans.”
Experts stressed that the accompanying strain poverty puts on brain power makes it difficult to engage in the kind of behaviors that pull a person out of poverty, regardless of geographic location or cultural factors.
“When people are already in poverty, it is hard to do the things that get them out of poverty because they are already using all of their mental resources, and so they are more likely to engage in behaviors that disable them from moving out of poverty,” Vohs said. “They need to be very motivated, which is much harder to do when in poverty because of these things that deplete their mental energy or capacity.”
Implications for poverty work
These findings may have profound implications for understanding how to alleviate poverty.
People in poverty already have many impositions on their mental bandwidth, from figuring out how they are going to get to work without a car to how they are going to pay rent that month, said Shafir. And many poverty programs such as job retraining or education programs are only adding to this load by requiring reams of paperwork or very specific times when a person must show up to receive the benefits. Such restrictions, which might seem minimal in isolation, add to the already maxed-out strain on a poor person’s mental ability and thus make it much harder for someone who wants to succeed.
Shafir said that people would generally agree it would be counterproductive to charge a monetary fee to someone to join a poverty-alleviation program, but that procedural hoops and strict requirements for programs are essentially doing the same thing. "Giving very complicated forms and meetings to attend on time charges their limited resource of bandwidth in the same way as charging them money,” he said.
While it's easy to think people failing to be prepared for a training program is a result of them not caring, it may be because the impositions they faced that day trying to succeed — like finding transportation and deciding whether they can afford a suit for a job interview — used up their available mental resources. Vohs said programs that cut down on lots of decision-making or those that start earlier in the day when people haven’t worn down their mental power tend to be more successful than those later in the day.
Shafir said this does not eliminate self-reliance from the equation. Programs that are designed to facilitate success rather than put up barriers will allow those who want to better themselves to do so. He said that a poor person's life like a pilot flying a plane. The pilot has many things drawing his limited mental resources such as how high to fly the plane, what the weather is like, and performing the proper safety crosschecks. And a good poverty program is like cockpit that is set up to help the pilot fly without causing him anymore mental stress.
“If you design the cockpit well, you can establish the good pilots from the bad pilots,” Shafir said. “You need to carefully set it up for the good pilots to succeed instead of setting up a situation — a badly designed cockpit — where good pilots will fail simply because of the setup. So in helping people in poverty, you need to design cockpit of everyday life for people who have lots of imposition on bandwidth.”
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