Why poor people make bad decisions

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

All attempts to fight poverty are based on the assertion that a person must independently pull himself out of the swamp. But is it possible? But what if poverty affects the minds of people, changes their ability to make decisions?

History of one casino

In 1997, a casino operated by the Cherokee opened near North Carolina. Despite the fact that such establishments always cause fear among the population, the casino quickly became profitable: in 2004 it brought in $ 150 million, and in 2010 - $ 400 million in profit. This money allowed the Cherokee to build a hospital, school and fire station. At the same time, the lion's share of the money went straight into the pockets of the population - more than 8,000 men, women and children. Over the years of the casino's operation, the income of an average family has increased 12 times.

Over the years, Professor Jane Costello has studied the behavior of Cherokee children, noting challenges and successes. It turned out that those kids who grew up in poverty were much more prone to discipline problems. But along with the increase in the average family income, the behavior situation also improved.

40% of children began to behave better, the level of juvenile delinquency decreased. Minors are less likely to use alcohol and drugs, smoke less.

It turns out that poverty forms the mindset and behavioral skills even in childhood.

Why do poor people do stupid things

A world without poverty is one of the most ancient utopias. But anyone who seriously thinks about it will surely face such questions:

• Why are the poor more likely to commit crimes?
• Why are they prone to obesity?
• Why do they use more alcohol and drugs?
• Why are so many stupid decisions made?

It sounds a little rude, but let's look at the statistics. Poor people are more likely to borrow and save less, smoke more, exercise less, drink more alcohol, and eat more junk food. Announce free training in financial management and the poor will be the last to sign up. The resume of poor people is far from ideal, and they often come to interviews unprepared and in an inappropriate form.

Margaret Thatcher once said that poverty is a personality defect. Few politicians have gone this far in their judgments, but this idea is not unique. The world is dominated by the belief that poverty is something that a person must overcome himself.

Of course, the state can push the poor man in the right direction through payment systems, fines, and training. But does it make sense?

But does it make sense?

What if the poor cannot help themselves at all, and the good intentions of the state only make the situation worse?

The questions are not easy, but not only we ask ourselves. For example, Eldar Shafir, a psychologist at Princeton University, is developing a revolutionary theory of poverty. Its main goal is to create a new area of knowledge - the science of scarcity.

Wait, there is already one. The economy is called.

Eldar Shafir hears such reproaches all the time. But his interest is focused on the psychology of scarcity, an area in which surprisingly little research has been conducted.

For economists, everything is somehow connected with the concept of scarcity. After all, even the biggest spenders cannot buy whatever they want. The perception of scarcity matters a lot. It affects our character. People begin to behave differently when they feel a deficit of this or that good.

It doesn't matter what kind of good we are talking about. Time, money, friendship or food - the lack of these benefits leads to the formation of a special, "scarce" mindset. People who are constantly in short supply are good at solving short-term problems. Poor people are amazingly able to make ends meet, but only for a short time. Eldar Shafir calls this phenomenon a decrease in the bandwidth of the mind.

There is no respite from poverty

Despite the described advantage, the scarce mindset has a major disadvantage. Scarcity automatically focuses your attention on what matters in the near future, such as urgent bill payments. And all long-term prospects remain out of sight. Eldar Shafir explains:

Scarcity consumes character. The ability to focus on other things that are very important to you is lost.

The researcher compares this to a new computer that processes ten complex queries at the same time. It will run slower and slower, make more mistakes and crash more often. Not because the computer is bad. The thing is that it performs too many tasks at once. The poor have the same problems. They don't make bad decisions because they are stupid. Because they are in a context where anyone would make a bad decision.

Questions like "What are we going to eat today?" and "How to survive until the end of the week?" require attention and tremendous effort. The poor person constantly loses concentration and is easily distracted. This continues day after day. It is not surprising that sooner or later such people start doing stupid things.

There is a big difference between those who are constantly busy and those who constantly have no money: you cannot rest from poverty.

Poverty is not a character problem. These are cash problems.

Is it possible to say exactly how stupid a person becomes from poverty?

Eldar Shafir says poverty takes 13-14 IQ points. This effect can be compared with the effects of chronic sleep deprivation or alcoholism. Surprisingly, this data could not be obtained for 30 years. Shafir admits:

Economists have been studying the phenomenon of scarcity for many years. Psychologists have been studying cognitive limitations for the same amount of time. We just put two and two together.

Eldar Shafir believes that poverty alleviation has advantages that no one has noticed before. The researcher proposes not only to calculate the GDP, but also to measure the bandwidth of the mind. The smaller it is, the more we are limited by poverty. The larger it is, the more productive the workers are, the higher the birth rate, the better health … Shafir says: the fight against poverty will lead to the prosperity of the state.

As for specific recommendations, the researcher proposes to tackle the consequences of poverty in stages.

What a person can do on their own and right now

The first thing a person suffering from a lack of money should do is to stop panicking and get rid of constant stress. By trying to solve the problems that arise every day, you are depriving yourself of the opportunity to plan, dream, and relax.

Problems will still arise. The pipe starts to leak. The car will break down. The policeman will issue a fine.

How can you help yourself to relax? Plan your vacation ahead of time. Even if you have absolutely no time. According to Shafir, 30 minutes will be enough to "meet yourself." Of course it won't be easy. But such a step is necessary.

What else can you do? Let's go back to the casino story. Randall Akee, an economist based in Los Angeles, calculated that evenly distributing casino income among the population ultimately helped to reduce overall costs. By eliminating poverty, society actually generated more money. This happened thanks to a drop in crime rates and an increase in educational levels, as well as the work of the security and health services.

The idea that fighting poverty is cheaper than poverty itself and its consequences is not new. A similar thought was expressed by the British essayist Samuel Johnson in 1782. He wrote:

Poverty is a great enemy of human happiness. It destroys freedom, making some goals unattainable and others incredibly distant.

Unlike his contemporaries, Johnson understood that poverty is not a character flaw.

Poverty is a lack of money.