Why Can’t More Poor People Escape Poverty?

by sambarvada Mon Jun 06, 2011 2:45 am

http://www.tnr.com/article/environment-energy/89377/poverty-escape-psychology-self-control?page=0,0

Last December, Princeton economist Dean Spears published a series of experiments that each revealed how “poverty appears to have made economic decision-making more consuming of cognitive control for poorer people than for richer people.” In one experiment, poor participants in India performed far less well on a self-control task after simply having to first decide whether to purchase body soap. As Spears found, “Choosing first was depleting only for the poorer participants.” Again, if you have enough money, deciding whether to buy the soap only requires considering whether you want it, not what you might have to give up to get it. Many of the tradeoff decisions that the poor have to make every day are onerous and depressing: whether to pay rent or buy food; to buy medicine or winter clothes; to pay for school materials or loan money to a relative. These choices are weighty, and just thinking about them seems to exact a mental cost.

In a paper in April 2010, Harvard behavioral economist Sendhil Mullainathan (for whom, full disclosure, I once worked) and MIT’s Abhijit Banerjee applied this same notion to decisions requiring self-control. If a doughnut costs twenty-five cents, they wrote, then that “$0.25 will be far more costly to someone living on $2 a day than to someone living on $30 a day. In other words, the same self-control problem is more consequential for the poor.” And so, in addition to all the structural barriers that prevent even determined poor people from escaping poverty, there may be another, deeper, and considerably more disturbing barrier: Poverty may reduce free will, making it even harder for the poor to escape their circumstances.

All of this suggests that we need to rethink our approaches to poverty reduction. Many of our current anti-poverty efforts focus on access to health, educational, agricultural, and financial services. Now, it seems, we need to start treating willpower as a scarce and important resource as well.

by Kris Mon Jun 06, 2011 2:59 am

Unless I am missing something, isn't the point being made that there is mental depletion as a result of opportunity-cost evaluations and there will be less of this if there is more money on hand? So, the root cause to be tackled is still money (or lack thereof). If that takes place and the free-will issue goes away, why should the latter issue be addressed separately?

by sambarvada Mon Jun 06, 2011 12:18 pm

Kris wrote:Unless I am missing something, isn't the point being made that there is mental depletion as a result of opportunity-cost evaluations and there will be less of this if there is more money on hand? So, the root cause to be tackled is still money (or lack thereof). If that takes place and the free-will issue goes away, why should the latter issue be addressed separately?

===> Why don't you read the complete article? I have posted the link. I have copied and pasted below part of the article which talks about how the government can help the poor to avoid trade-offs when practicing self control.

Some promising approaches have already been tried. Starting in 2002, economists Nava Ashraf, Dean Karlan, and Wesley Yin created and analyzed a unique type of savings account at a small rural bank on the island of Mindanao in the Philippines. The Green Bank of Caraga’s SEED accounts (Save, Earn, Enjoy Deposits) let clients place restrictions on when they could access their money. SEED clients could set either a date before which or a minimum savings amount below which they couldn’t access their own funds. Twenty-eight percent of existing bank clients who were offered the accounts enrolled in them, and, after one year, the economists found, customers saved over 300 percent more with SEED accounts than they would have without them. The accounts offered an opportunity to circumvent self-control failure, in the same way Ulysses bound himself to the mast to resist the Sirens’ call.

The developed world offers numerous such “commitment products”: certificates of deposit, pension plans, government savings bonds, and education savings accounts, to name a few. But, in the developing world, institutional supports for flagging willpower are far fewer. To make use of these new discoveries, similar products that explicitly attempt to reduce willpower costs could be developed in numerous fields, from health to education to agriculture to financial management.

This brings up a second, similar point: Comfort goods like washing machines and dishwashers free up valuable time and attention. Think of all the things the wealthy do to spend more time focusing on what’s important. They can pay bills automatically, they can hire babysitters and have food delivered, they can have their homes and clothes cleaned for them. But, in the developing world, cost-effective time savers have come much more slowly to those who most need them. Five-dollar, energy-efficient stoves can cut firewood usage, improving children’s health and halving the amount of time it takes to gather enough firewood to cook. Small solar panels systems, too, as The New York Times recently reported, can play “an epic, transformative role” in homes off the electrical grid, saving families time and money on kerosene. Broadly distributed, such simple innovations would allow the poor to avoid difficult tradeoff decisions about how they spend their time or even their money.

Third, money itself can go a long way toward altering the dynamic that leads to willpower depletion among the poor. Government transfers of money have proven successful in Mexico and Brazil, for instance. In particular, attaching conditions to these transfers—such as requiring school attendance, regular clinic visits, and savings behavior—may allow for an end-run around the kind of willpower-based poverty traps that too frequently seem to end with the poor making unwise decisions.

Finally, what about the possibility of strengthening the willpower “muscle”? Here, the research is complicated. While one line of research has found reason to think that drained willpower can be restored in the short term—by taking a walk in nature or watching a humorous video, for instance—studies on how to strengthen the willpower muscle in the long term are far less conclusive. This second line of research seems to be more promising in children than in adults. As Kathleen Vohs of the University of Minnesota, who has done extensive research on willpower, put it, “There might be something of a developmental sweet spot.” In twelve U.S. states, a program called Tools of the Mind is explicitly aimed at improving willpower functions in prekindergarten and kindergarten children. While some of the strategies would be quite difficult in much of the developing world, many are not, or could be adapted.

Of course, to argue that stressful decisions can exhaust precious mental resources is not to suggest that the decisions of the poor can’t be attributed to human agency. Still, while free will is real, it is also subject to complications. The economist Amartya Sen, in his well-known volume Development as Freedom, notes how an individual’s “freedom of agency” is “constrained by the social, political and economic opportunities” available to them. He’s right: Fewer options do reduce freedom. But now, we may need to grapple with a new possibility: that poverty doesn’t simply reduce freedom by constraining an individual’s choices, but that it may actually alter the nature of freedom by reducing an individual’s willpower.

by Kris Mon Jun 06, 2011 10:20 pm

Thanks for posting. I read this and will read the whole article when I have some free time. I think there is a more plausible explanation on the matter. When you lead a hand-to-mouth existence, it could well be that you are not used to the products/services being offered and lack the knowledge to leverage them for your benefit. The absence of this both in you and in your social circles could be the more direct impediment.

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