Sendhil Mullainathan, a behavioral economist at Harvard, studies how scarcity affects people’s intelligence, will-power and decision-making. He wants to change your mind about poverty and inequality by studying what makes people poor, why people have a hard time escaping poverty and what programs can help get people out of poverty.
Liberals and conservatives see poverty in starkly different terms. Conservatives see poverty mostly as a problem of individual behavior: People become poor because they make bad decisions. They lack the will-power to stay in school, or to get to work on time, or to save for a rainy day and so on. Liberals see poverty as a social problem: Poverty results from a lack of opportunity, a tilted playing field or the lack of a safety net when people suffer one of life’s random blows.
Mullainathan’s research (
recently profiled in Harvard Magazine) explored the impact of poverty on intelligence. He put people into hypothetical situations where they were faced with spending money on urgently-needed auto repairs. After priming his subjects to consider a major unplanned expense, Mullainathan administered an IQ test. As the cost of the hypothetical repairs went up, people’s performance on the IQ test went down sharply. When the price of the repairs jumped from $300 to $3,000 dollars, people’s IQ dropped 14 points. That’s more than you would lose after pulling an all-nighter.
What is crucial about this and similar research is that the subjects in it are randomly assigned to either feeling poor or feeling rich. We are not comparing poor people against non-poor and speculating about the differences. Instead, we are taking non-poor people and randomly placing half of them in a situation that makes them feel poor, and the other half in a situation that makes them feel adequately resourced. Even among Stanford students, if you put them in a situation in which they feel under-supplied, cognitive performance declines.
This research adds to extensive prior research on brain exhaustion. It turns out that various brain functions are highly interrelated, and if you tax one part of a person’s mental and emotional capacity, you degrade the other parts. For example, if you exhaust people mentally by making them do challenging puzzles, they are less able to resist fresh-baked chocolate cookies. Conversely, if you make people go hungry, they don’t think as clearly as they do when they are adequately fed.
All of this raises profound questions about what precedes what in the cycle of poverty. Are poor people poor because they make bad decisions? Or is it that, as Mullainathan
said, “people make bad decisions because they are poor.” Both intellectual capacity and emotional self-regulation are compromised by being poor, and the longer the poverty continues, the greater the damage. Thus, the emotional and intellectual burden of poverty adds to the immediate and practical problems of not having enough money. This cycle of causation magnifies poverty across generations.
Mullainathan’s research has important implications for policy. Anti-poverty programs need to be realistically designed to fit the actual life circumstances of poor people. All too often, the policymakers designing the programs – and opposition politicians criticizing them – have no experience of poverty and little understanding of the actual burdens it brings. For example, those who oppose regulation of payday lending argue that the market should be allowed to work unimpeded, and that payday lending customers simply need to show the will-power not to borrow more than they can pay back. Such criticism is unrealistic given the actual desperate circumstances in which people find themselves.
It’s not easy to design programs that give people some relief from scarcity so they can begin to rebuild their lives. Programs must find the elusive sweet spot between providing meaningful and necessary support on one hand, and not creating ongoing dependency and disincentive on the other.
In our hypercompetitive economy, bootstrap-pulling alone doesn’t work for most. Most of today’s poor need all of their strength to keep the roof from falling on their heads. With their hands stretched upwards, they can hardly reach their bootstraps.
David Brodwin is a co-founder and board member of American Sustainable Business Council. This article appeared in U.S. News & World Report May 6, 2015.