Study: Poverty causes poor decision making

Anxiety caused by the lack of funds can impair people's ability to choose

Topics: fast company, Poverty, Wealth, Decision, study, ,

So you’re standing in the cereal aisle in search of breakfast. Do you opt for granola or Fruit Loops, high nutrition or low cost? Or do you really not care either way?

New research published in the journal Science suggests that if you have the option of not caring, you’re probably wealthy. And if you have no choice but to make such choices, you’re perhaps in poverty. By having to continually make these small decisions, poverty forces people to make worse decisions overall.

This, Matt Yglesias observes at Slate, is one of the primary privileges of affluence: the convenience of not having to sweat the small stuff.

The authors of the paper conclude that “poverty itself” reduces cognitive capacity, suggesting that this is because “poverty–related concerns consume mental resources, leaving less for other tasks.”

They tested this hypothesis both in the States––among low–income visitors to a New Jersey shopping mall––and abroad, among farmers in the Indian state of Tamil Nadu. Yglesias supplies the recap:

Among Americans, they found that low–income people asked to ponder an expensive car repair did worse on cognitive–function tests than low–income people asked to consider cheaper repairs, and worse than higher–income people faced with either scenario. To study the global poor, the researchers looked at performance on cognitive tests before and after the harvest among sugarcane farmers. Since it’s a cash crop rather than a food one, the harvest signals a change in financial security but not a nutritional one. They found that the more secure post–harvest farmers performed better than the more anxious pre–harvest ones.

Money’s not everything, but not having it is.

This is a matter of what psychologists call “decision fatigue”––the phenomenon in which you can only make so many decisions within a day before they start to erode in quality.

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This has been seen across fields. A famous study of Israeli judges, for instance, found that they gave harsher decisions later in the day than in the morning. Similarly, if you’re going in for a job interview, you should make sure that it happens first thing––otherwise your excellence will be taken for mediocrity. Or why tired people tend to be less ethical.

Why? While it’s too big a topic for a single blog post, a brain is an organ, not a machine, so after a long period of effort––like fretting over how to make ends meet––it needs be renewed if it’s going to function at a high level later in the day.

This has also been made clear in happiness research. One of the primary reasons why the correlation between happiness and income levels off after $50,000 or $70,000 a year (depending on the study, and, you might say, the cost of living in a place) is that enough capital enables you not to worry as much about budgeting and to be able to absorb life’s unexpected volatilities––job loss, illness, and the like.

Hat tip: Slate

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