Friday, November 29, 2013

Poverty: The Cognition of Scarcity

Poverty impacts decision making a lot more than you'd think.

When we think about poverty, we make certain assumptions about people and how they make decisions, especially such assumptions about people's motives and abilities.  Basically, they fall into two categories:  Rational vs empirical.  And they presuppose a certain amount of agency.  In a rational approach we look at people making logical decisions trying for a certain optimum.  However, empirical evidence points otherwise.

Problems in Poverty include:

  • Adherence:   Low income: one of the most consistent correlates of low adherence. Behavioral economic alternative: not always rational, not always folk. Context of poverty imposes a psychology of not having enough leads to certain Behavior.  Situational psychology. Context is very important

  • Weeding

Losses due to uncontrolled weed growth
Poor less likely to weed

  • Parenting

Attention, consistency, engagement
Consistent finding: poor are worse parents

Short term high interest loans

Understanding behavior in poverty
Psychology of scarcity
Conditions of scarcity produce their own psychology.
Lot of cognitive work

Tunneling -- focus on right now and don't see periphery. (Attentional tunnel)

Heritage foundation: poor have ac, cable tv, and other modern amenities
Poverty is a subjective effect
As society develops, ideas of necessities change.
Poor is not affording minimally acceptable life .

Scarcity is a source of cognitive demand
Scarcity also leads to loneliness

Effects of starvTion
Dreaming constantly about food
Cognitive capacity (a limited resource) is captured by scarcity (we focus on it)
Automatically (our mind has a life of its own)

Poor in
Money/ time trade offs and temptations and indulgences
More consequences, when there's lack of slack, every error is more consequential

Scarcity is on top of your mind and scarcity is distracting .
Cognitive control studies .
Fluid intelligence (ravens matrices). See mani mullainathan, shafir 2013
Poverty distracting and affect intelligence
Harvest study in chennai India shows change in intelligence before and after harvest

Think of timing of message to comport with changes in poor peoples performance

If you google payday loans, impatience is a key driver

Less cognitive space for good parenting

Poor must make higher quality decisions
Greater packing challenges under scarcity
Greater attention consumed under scarcity
More temptations under scarcity

Policy makers need to care about bandwidth
Scarcity causes scarcity in bandwidth
Scarcity function of ones environment : buffer savings, insurance, , cheap loans, friends and family
Affects policy choices

FAFSA (for poor students) take up is not high . Very complicated and a turn off to poor.
By giving support for filling out a form, you increase compliance.

Retirement savings
Opt out programs have higher compliance.
$12 capsule glows, beeps, and emails when not opened. May have 2decade increase in life expectancy

Design life's cockpits to help people cope with scarcity and bandwidth

Policy makers need to care about bandwidth
Lifetime limit on TANF is outside tunnel;failed to motivate and penalize
Recertificztion SNAP, long forms
Financial literacy shows very little effect on people's behavior
Poor can't survive being thrown into storm after education.
Need to think about time , resource , finance constraints
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