Wednesday, August 31, 2016

Poverty and Bad Decisions

An interesting piece by Emily Badger at CityLab cites research that suggests that, contrary to common opinion, poor people are not poor because they make bad decisions but rather they make bad decisions because they're poor. The exigencies of poverty, some research shows, exert such a powerful pull on people that unwise choices are practically inevitable. Here's part of her essay:
Researchers publishing some ground-breaking findings today in the journal Science have concluded that poverty imposes such a massive cognitive load on the poor that they have little [cognitive] bandwidth left over to do many of the things that might lift them out of poverty – like go to night school, or search for a new job, or even remember to pay bills on time.

In a series of experiments run by researchers at Princeton, Harvard, and the University of Warwick, low-income people who were primed to think about financial problems performed poorly on a series of cognition tests, saddled with a mental load that was the equivalent of losing an entire night’s sleep. Put another way, the condition of poverty imposed a mental burden akin to losing 13 IQ points, or comparable to the cognitive difference that’s been observed between chronic alcoholics and normal adults.

The finding further undercuts the theory that poor people, through inherent weakness, are responsible for their own poverty – or that they ought to be able to lift themselves out of it with enough effort. This research suggests that the reality of poverty actually makes it harder to execute fundamental life skills. Being poor means, as the authors write, “coping with not just a shortfall of money, but also with a concurrent shortfall of cognitive resources.”
I don't know how reliable this study is, but I hope it's conclusions are not true. If they are true then the plight of the poor is almost hopeless. According to the study the poor make unwise decisions because they're poor, but they can't get out of poverty until they stop making unwise decisions. They're caught in a vicious cycle. Indeed, this study provides those living below the poverty line with a good reason to just give up.

Badger thinks, though, that taxpayers should give the poor financial independence so they can be freed from the stressors that drive them to make bad choices:
Conversely, going forward, this also means that anti-poverty programs could have a huge benefit that we've never recognized before: Help people become more financially stable, and you also free up their cognitive resources to succeed in all kinds of other ways as well.
Unfortunately, we've already conducted that experiment. Since the 1960s we've spent $22 trillion on the War on Poverty and there are still millions of our fellow citizens living in relative poverty (I say "relative" because poor people in America are only poor relative to their contemporaries in the U.S. Relative to the vast numbers of people who've inhabited the planet throughout history our poor are fabulously wealthy). How much more can, and should, we give and what reason do we have for thinking that we're not now at the point of diminishing returns? When the government subsidizes something we get more of it. That goes as much for poverty as it does for anything else.

Reading Badger's column raises a question: If it's true that poverty makes people choose actions that perpetuate their poverty how do we account for the fact that so many poor people have surmounted their circumstances, especially before there were any social welfare programs in place to help them? Irish and Asian immigrants had nothing but the shirts on their backs when they landed on these shores, and the latter didn't even speak English. Yet many of them, despite suffering brutal discrimination, made the choice to work hard, and they overcame tremendous odds to succeed. Moreover, much of the American population was impoverished during the Great Depression, yet they rose out of it, and still today many are lifting themselves out of poverty and achieving middle class status or higher.

Maybe there's something I'm missing, but all of this taken together causes me to wonder if maybe it's not Ms. Badger and the study she cites that are missing something.