How poverty takes over the mind

By Cass R Sunstein, Published TODAY, 19 Sep 2013

Suppose you got no sleep last night and have to take an intelligence test today. If you’re like most people, you’re not going to do so well on that test. Now, suppose you are struggling with poverty and you have to take the same intelligence test. How, if at all, will your score be affected?

Harvard University economist Sendhil Mullainathan and Princeton University psychologist Eldar Shafir offer a clear answer: You will probably do pretty badly. In a series of studies, they found being poor and having to manage serious financial problems can be a lot like going through life with no sleep.

The reason is that, if you are poor, you are likely to be preoccupied with your economic situation and your mind has less room for other endeavours. This claim has important implications for how we think about poverty and for how we select policies designed to help poor people.

In one experiment, they went to a large shopping mall and paid numerous people, with a diverse range of incomes, to participate in a little test. They began by asking participants how they would solve a financial problem (for example, they might need to spend a certain sum of money to fix their car).

Participants were randomly assigned to one of two versions of the problem. In the “hard” version, the cost involved was pretty high (it might cost US$1,500, or S$1,900, to fix the car). In the “easy” version, the cost was low (US$150). After explaining how they would solve the problem, people were subjected to intelligence tests.

TOLL OF BEING POOR

Here’s the remarkable result: When rich people and poor people were assigned to the easy version of the financial problem, they performed about the same on the intelligence tests. But when they were assigned to the hard version, with its larger financial stakes, poor people did a lot worse on the intelligence tests and rich people looked much smarter.

Was this a result of some kind of “maths anxiety” on the part of the poor? Evidently not.

Mr Mullainathan and Mr Shafir conducted a second experiment in which they began, not with a financial problem, but with arithmetic questions, using the same sets of numbers as in the first experiment. In this version of the experiment, greater difficulty in the initial question didn’t produce differences between rich and poor on subsequent intelligence tests.

What’s going on here? The researchers have a straightforward answer. If you are poor and you are trying to manage a hard financial situation, your mental resources will be strained, and you are less likely to perform well on other tasks.

To be sure, an experiment with people at a shopping centre is pretty artificial. The authors created a similar test in the field, involving sugar cane farmers in India.

What made the test possible is that sugar cane farmers face serious financial pressures before harvest; after harvest, they are far more comfortable. Mr Mullainathan and Mr Shafir administered an intelligence test to hundreds of farmers pre-harvest and the same test to hundreds of others post harvest.

The result? After harvest, the farmers looked a lot smarter. Here again, Mr Mullainathan and Mr Shafir suggest that if you are in the midst of economic struggles, your mind will be occupied and you won’t be able to perform so well on other tasks. (They controlled for nutrition and for stress, and found that those factors didn’t matter.)

IMPLICATIONS FOR POLICIES?

In their experiments, they found that the effect of being poor and having to manage a hard financial problem is equivalent to the loss of 13 IQ points — comparable not only to the loss of a full night’s sleep but also to that of being a chronic alcoholic, or being 60 years old rather than 45.

Their conclusion is that poor people “are less capable not because of inherent traits, but because the very context of poverty imposes load and impedes cognitive capacity”.

This claim casts a new light on some important findings with respect to the behaviour of poor people, including the difficulties they face in complying with medical drug regimens, keeping appointments and managing their finances. In all these cases, the problem isn’t adequately described as a deficient sense of responsibility — it reflects, at least in part, the cognitive demands created by poverty itself.

There are also important implications for government policy. Even more than the rest of us, poor people can greatly benefit from frequent reminders, as well as from sensible default rules, which establish what happens if they do nothing at all.

With respect to forms and applications, simpler is usually better. If we are trying to design educational, training and employment programmes for the poor, that is a critical lesson to keep in mind. 

BLOOMBERG

Cass R Sunstein is the Robert Walmsley University Professor at Harvard Law School and former Administrator of the White House Office of Information and Regulatory Affairs.