Poverty isn't a lack of character. It's a lack of cash - The Correspondent - 0 views
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analysis opinion economy poverty sustainability economics psychology development
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Scarcity impinges on your mind. People behave differently when they perceive a thing to be scarce.What that thing is doesn’t much matter. Whether it’s too little time, money, friendship, food – it all contributes to a “scarcity mentality”. And this has benefits. People who experience a sense of scarcity are good at managing their short-term problems. Poor people have an incredible ability – in the short term – to make ends meet, the same way that overworked CEOs can power through to close a deal
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Despite all this, the drawbacks of a “scarcity mentality” are greater than the benefits. Scarcity narrows your focus to your immediate lack – to the meeting that’s starting in five minutes, or the bills that need to be paid tomorrow. The long-term perspective goes out the window. “Scarcity consumes you,” Shafir explains. “You’re less able to focus on other things that are also important to you.”
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“Mental bandwidth,” Shafir and Mullainathan call it. “If you want to understand the poor, imagine yourself with your mind elsewhere,” they write. “Self-control feels like a challenge. You are distracted and easily perturbed. And this happens every day.” This is how scarcity – whether of time or of money – leads to unwise decisions.
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what difference can a nudge really make? The nudge epitomises an era in which politics is concerned chiefly with combatting symptoms. Nudges might serve to make poverty infinitesimally more bearable, but when you zoom out, you see that they solve exactly nothing
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“Our effects correspond to between 13 and 14 IQ points,” Shafir says. “That’s comparable to losing a night’s sleep or the effects of alcoholism.” What’s remarkable is that we could have figured all this out 30 years ago. Shafir and Mullainathan weren’t relying on anything so complicated as brain scans. “Economists have been studying poverty for years and psychologists have been studying cognitive limitations for years. We just put two and two together.”
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Randall Akee, an economist at the University of Los Angeles, calculated that the casino cash distributed to Cherokee kids ultimately cut expenditures. According to his conservative estimates, eliminating poverty actually generated more money than the total of all casino payments through reductions in crime, use of care facilities, and repetition of school grades.
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“Fighting poverty has huge benefits that we have been blind to until now,” Shafir points out. In fact, he suggests, in addition to measuring our gross domestic product, maybe it’s time we also started considering our gross domestic mental bandwidth. Greater mental bandwidth equates to better child-rearing, better health, more productive employees – you name it. “Fighting scarcity could even reduce costs,” he says.
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Granted, it would take a big programme to eradicate poverty in the US. According to economist Matt Bruenig’s calculations, it would cost $175bn. But poverty is even more expensive. One study
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“Poverty is a great enemy to human happiness; it certainly destroys liberty, and it makes some virtues impracticable, and others extremely difficult,” said the British essayist Samuel Johnson in 1782. Unlike many of his contemporaries, he understood that poverty is not a lack of character.It’s a lack of cash.