Why Do Poor People Make Bad Decisions?
From The Correspondent, this is an article by Dutch historian Rutger Bregman about why poor people make low-quality decisions. In a nutshell, it’s because living in poverty overwhelms your brain, decreasing cognitive ability by a significant amount. The piece cites a number of supporting studies, but this one is perhaps the most relevant to separating cause from effect:
Shafir found what he was looking for some 8,000 miles away in the districts of Vilupuram and Tiruvannamalai in rural India. The conditions were perfect. As it happened, the area’s sugarcane farmers collect 60% of their annual income all at once right after the harvest. This means they are flush one part of the year and poor the other.
So how did they do in the experiment?
At the time when they were comparatively poor, they scored substantially worse on the cognitive tests. Not because they had become less intelligent people somehow — they were still the same Indian sugarcane farmers, after all — but purely and simply because their mental bandwidth was compromised.
Another study, of Cherokee families whose income increased dramatically due to casino revenues, shows just how beneficial more money is to poor communities:
Soon after the casino opened, Costello was already noting huge improvements for her subjects. Behavioural problems among children who had been lifted out of poverty went down 40%, putting them in the same range as their peers who had never known hardship. Juvenile crime rates among the Cherokee also declined, along with drug and alcohol use, while their school scores improved markedly. At school, the Cherokee kids were now on a par with the study’s non-tribal participants.
On seeing the data, Costello’s first reaction was disbelief. “The expectation is that social interventions have relatively small effects,” she later said. “This one had quite large effects.”
Costello calculated that the extra $4,000 per annum resulted in an additional year of educational attainment by age 21 and reduced the chance of a criminal record at age 16 by 22%.
This article was adapted from Bregman’s book, Utopia for Realists: How We Can Build the Ideal World, in which he advocates for three main changes to make our global society more equitable: a universal basic income, a 15-hour work-week, and open borders. The UBI issue is what he’s most known for — check out his 2013 article, Why we should give free money to everyone, and his two TED Talks on the topic. BTW, did you know that Nixon almost implemented a UBI in the US in the late 60s?
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