The psychology of poverty

Conventional wisdom on poverty has been that poor remain poor because of low incomes and their certain lifestyle and behavioural traits - lack of cleanliness, limited self-control, wasteful expenditures, idling away time etc. While incomes are not within their control, it has been argued that the poor could be encouraged to change certain behavioural traits that could increase the likelihood of their overcoming or atleast mitigating poverty.

This post is a summary of considerable research that appears to point to a significant role of behavioural psychology in determining the behaviour of the poor.

1. I had blogged earlier about the bee-sting theory of Charles Karelis.

When we're poor our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems. Poverty and wealth, by this logic, don't just fall along a continuum the way hot and cold or short and tall do. They are instead fundamentally different experiences, each working on the human psyche in its own way.

Karelis argues that poverty introduces a diminishing marginal utility to putting in effort, "One doesn't have enough money to pay rent or car insurance or credit card bills or day care or sometimes even food. Even if one works hard enough to pay off half of those costs, some fairly imposing ones still remain, which creates a large disincentive to bestir oneself to work at all."

2. Conventional wisdom would have it that people exercise their free willpower to resolve conflicts among competing choices and demands on their scarce resources (be it money, time, space, attention, affections etc) and make decisions in a rational manner and in their best interests. In other words, these decisions are thought to be under the control of the respective individuals.

A recent New Republic article points to the pioneering work of researchers from Case Western Reserve University, Roy Baumeister, Ellen Bratslavsky, Mark Muraven, and Dianne Tice, who found that an individual’s capacity for exerting willpower was finite. Their experiments found that self-control was depletable - exerting willpower in one area makes us less able to exert it in other areas subsequently in the immediate future.

They had food-deprived subjects sit at a table with two types of food on it: cookies and chocolates; and radishes. Some of the subjects were instructed to eat radishes and resist the sweets, and afterwards all were put to work on unsolvable geometric puzzles. Resisting the sweets, independent of mood, made participants give up more than twice as quickly on the geometric puzzles. Resisting temptation, the researchers found, seemed to have "produced a 'psychic cost'".

In another experiment, participants were asked to remember a number – the number was randomly selected to either be a short two digit number or a seven digit number – and then to walk down a hallway to another room for an interview. As a seeming afterthought, they were told there is a snack cart in the hallway and to help themselves to one of the snacks. The snack choice was either fruit salad or chocolate cake. The subjects asked to remember the two-digit number selected the fruit salad in equal proportions to the chocolate cake. The subjects tasked with remembering the longer seven digit number overwhelmingly chose the chocolate cake. The authors attribute this to depletable self-centrol - when attention is focused elsewhere, such as on retaining a long number, there is less of this resource available to guide the decision over snack choice.

In another experiment in rural Rajasthan by Dean Spears, people were, in random order, offered to purchase a well-known brand of soap at a highly discounted price and they were also asked to squeeze a mildly resistant handgrip for as long as possible (handgrips are common way to measure cognitive control, with the duration determined by mental will power). He found that if the hand grip came before the offer of discounted soap, both poor and rich respondents squeezed the grip for an average of two minutes. But if the decision to purchase soap was taken before the hand grip exercise, the rich respondents still held the handgrip for an average of two minutes, while the poor gripped for a full 40 seconds less. He found that by making economic decision making more difficult for the poor, poverty depletes cognitive control.

These results have been corroborated in more than 100 experiments, where researchers have found that exerting self-control on an initial task impaired self-control on subsequent tasks - consumers became more susceptible to tempting products; chronic dieters overate; people were more likely to lie for monetary gain; and so on. In addition to self-control decisions, these researchers have expanded the theory to cover tradeoff decisions - like choosing between more money and more leisure time. They have found that tradeoff decisions require the same conflict resolution as self-control decisions and appears to similarly deplete our ability to muster willpower for future decisions.

In all these cases, willpower can be understood as the capacity to resolve conflicts among choices as rationally as possible, and to make the best decision in light of one’s personal goals. And, in all of them, willpower seems to be a depletable resource. The Development Impact blog writes,

"The conditions of poverty exact a heavy toll on cognitive resources through the everyday challenges of scarcity. The repeated trade-offs confronting the poor in daily decision making – i.e. "should I purchase a bit more food or a bit more fertilizer?" – occupy cognitive resources that would instead lay fallow for the wealthy when confronted with the same decision. The rich can afford both a bit more food and a bit more fertilizer, no decision is necessary...

My impulsive desire may prefer the consumption good in front of me, but my cognitive control can resist that impulse and select the alternative investment good if it hasn’t already been depleted through recent repeated usage. If my control resource has been depleted through earlier use, then the conditions of poverty can induce behavior that in turn prolongs poverty... because cognitive control is a depletable resource, the higher frequency of difficult economic decisions confronting the poor takes a toll on subsequent decisions."

Dean Spears did field experiments in India and analysed the American Time Use Survey and found that poverty is responsible for lower performance and control.

3. The theory of declining temptations says that the fraction of the marginal dollar that is spent on temptation goods decreases with overall consumption. Sendhil Mullainathan and Abhijith Banerjee argue that "declining temptations can help to explain a large range of phenomena, from poverty traps to credit and investment behavior". They argue that this "has a number of striking implications for the investment, savings, borrowing and risk-taking behavior of the poor".

They advocate using these insights to design commitments savings products (that both force savings and limit withdrawals) for poor people. Nava Ashraf, Dean S. Karlan, and Wesley Yin designed commitment savings products for a Philippine bank and found that those who opened the account increased savings by 192% and 337% over 6 and 12 months respectively relative to the control group.

4. Lack of control

Psychologist Martin Seligman has propounded the concept of "learned helplessness", as a "condition of a human person or an animal in which it has learned to behave helplessly, even when the opportunity is restored for it to help itself by avoiding an unpleasant or harmful circumstance to which it has been subjected". It follows that clinical depression and related mental illnesses may result from a perceived absence of control over the outcome of a situation.

Accordingly, when we don't feel we have some level of control over our lives we get depressed. And when we feel we have no control for a long time we stop trying to improve a terrible situation because we don't think it's possible anymore. Eric Barker writes about the story of taming elephants - after being leashed by a chain and realizing that they cannot break-free, elephants stop trying to get free even if the chain is replaced with a rope. Such feeling of lack of control, arising from factors like unfair workplaces, bad bosses, and unemployment, have been found to lead to poor health. It is therefore natural for a poor person, who faces a series of continuous struggles on even the most mundane and basic of things, to feel that things are mostly out of his control and accordingly feel depressed and unproductuive.

5. Decision fatigue

I have blogged earlier about a study by Shai Danzigera, Jonathan Levavb and Liora Avnaim-Pessoa of the changes in the nature of decision-making by eight experienced parole judges in Israel during a court session. They found that the prisoners appearing for parole were "anywhere between two and six times as likely to be released if they are one of the first three prisoners considered versus the last three prisoners considered".

The larger message sought to be highlighted by this experiment is that human beings are vulnerable to decision fatigue - the ability to discriminate and make objective decisions get depleted as the session or day (or even life?) progresses. Jon Tierney sums it up nicely,

"No matter how rational and high-minded you try to be, you can’t make decision after decision without paying a biological price. It’s different from ordinary physical fatigue — you’re not consciously aware of being tired — but you’re low on mental energy. The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts, usually in either of two very different ways. One shortcut is to become reckless: to act impulsively instead of expending the energy to first think through the consequences... The other shortcut is the ultimate energy saver: do nothing. Instead of agonizing over decisions, avoid any choice. Ducking a decision often creates bigger problems in the long run, but for the moment, it eases the mental strain. You start to resist any change, any potentially risky move — like releasing a prisoner who might commit a crime. So the fatigued judge on a parole board takes the easy way out, and the prisoner keeps doing time."

This analysis is similar to the arguement above that people have a finite store of mental energy, which enables them to exert self-control. Therefore, once they indulge in activities that require utilization of this self-control (like decision making), their reservoir of mental energy is depleted, and they are likely to show less mental commitment in subsequent activities. This phenomenon manifests itself in people making irrational and often impulsive choices and decisions when their mental energy level gets depleted.

Extending this analysis to poor people could help throw light on some of the elements that characterize people living in poverty. Experiencing scarcity in everything (time, money, space, jobs, physical strength etc), more than any others, poor people have to constantly make decisions involving trade-offs. This depletes their pool of mental energy faster, leaving them to either act impulsively or not act at all. The popular caricatures of poor people with different manifestations of these attributes can atleast partially be attributed to decision fatigue and depleting mental energy.

Tierney offers a neat summary of all these new behavioural psychology theories of poverty,

"This sort of decision fatigue is a major — and hitherto ignored — factor in trapping people in poverty. Because their financial situation forces them to make so many trade-offs, they have less willpower to devote to school, work and other activities that might get them into the middle class. It’s hard to know exactly how important this factor is, but there’s no doubt that willpower is a special problem for poor people. Study after study has shown that low self-control correlates with low income as well as with a host of other problems, including poor achievement in school, divorce, crime, alcoholism and poor health."