Why do poor people make so many stupid decisions?
It’s a tough question, but the numbers are even harder: they borrow more, save less, smoke more, exercise less, drink more, educate worse, and eat at McDonald’s more often. When a workshop ‘dealing with money’ is organized, the poor show up least often. When a vacancy is posted online, the poor write the worst cover letters and appear shabby on interview.
There are now 1.3 million: Dutch people who live below the poverty line. Payment forms go like crazy over the municipal counter and food banks are working overtime – now waiting lists have been drawn up for them. What is going on? Crisis yes, of course. But what else? Margaret Thatcher, England’s first woman prime minister, once said that poverty is “a fundamental lack of character,”she said in an interview in 1978 . Not many Dutch politicians would go so far now, but that the solution should be sought mainly with the individual, that is no longer an exceptional position.
Benefit forms go like hot cakes over the counter and food banks run overtime – there are even waiting lists for them
Take the plan of State Secretary Jetta Klijnsma (Social Affairs, PvdA). She wants to give people on social assistance “incentives” to go to work. In case of ‘inappropriate behavior’, ‘lack of personal care’ or ‘unkempt clothing’, they receive a three-month penalty on their benefit. This is in line with an international trend: from Australia to England and from Sweden to the United States, people are convinced that people must help themselves out of poverty. The government must give the right pushes for this – it is called an activating policy. Think of: information, surcharges, fines and, above all, education. Education is the holy grail of fighting poverty.
But. There is only one.
What if the poor are unable to help themselves?
What if the incentives, information and education slip from them like water from a duck?
Or even more, what if the pushes from the government only make the situation worse?
Scarcity
These are also hard questions, but they are not just asked by anyone. Eldar Shafir is a psychologist at the prestigious Princeton University. Together with Sendhil Mullainathan, an economist at Harvard University, he recently published a new, groundbreaking theory of poverty. In the important journal Science.This can be summarized as follows:
It’s the context, stupid .
State Secretary Klijnsma may feel addressed. Take the brand new website of its ministry: www.effectiefarmoedebeleid.nl. Visit the website here.‘People can think more than they do themselves,’ is under the heading ‘Prevention & own strength’. The website is a platform to exchange knowledge about the best anti-poverty initiatives. And the commitment is clear: “By assuming self-reliance and talent, someone with self-esteem and strength comes out of a difficult situation more easily.”
When I present that text to Professor Shafir, in the lobby of an Amsterdam hotel, a smile appears on his face. “This is pretty much the opposite of what I argue.”
“Scarcity takes possession of your mind, people act differently with a feeling of lack”
And Eldar Shafir is not just anybody. The leading magazine Foreign Policy named him one of the hundred most influential thinkers of the moment. President Obama asked him as an advisor and recently spoke at the World Economic Forum. Shafir’s ambition is therefore not insignificant: to lay the foundation for an entirely new science. The science of scarcity.
Wait a minute, you say, wasn’t there something like that already? The economy? “We hear that often,” laughs Shafir. “But I am interested in the psychology of scarcity. And surprisingly little research has been done on that. ‘ Everything is scarce for economists – not even the greatest rich people can buy everything. But the feelingscarcity is not ubiquitous, says Shafir. An empty agenda gives a different feeling than a full working day. And that is not innocent. “Scarcity takes possession of your mind,” says Shafir. “People act differently when they feel lacking.”
It doesn’t really matter what that shortage is: too little time, money, friends, calories – it all creates a ‘scarcity mentality’. And that brings benefits. People who experience scarcity are good at managing their short-term problems. Armen succeed surprisingly well in the strings – short term – together in knots, as well as overworked CEOs are adept at retrieving their latest target .
You cannot take time off from poverty
However, the disadvantages of the ‘scarcity mentality’ outweigh the advantages. Scarcity lets you focus on your immediate lack: the bill to be paid tomorrow or the meeting that starts in a few minutes. Thus, the long-term perspective disappears. “Scarcity gobbles you up,” says Shafir. “You pay less attention to things that you actually think are important.”
Compare it to a new computer that runs ten heavy programs simultaneously. The device is slow, making mistakes, and freezing – not because it’s a bad computer, but because it has to do too much at once. Something similar is going on with arms. They do not take stupid decisions because they are stupid are , but because they live in an environment where everybody would take stupid decisions.
Scarcity lets you focus on your immediate lack: the bill to be paid tomorrow or the meeting that starts in a few minutes
What are we eating tonight? What do I pay the school fees for? How do I get to the end of the week?
Such questions take up something crucial: “bandwidth,” Shafir and Mullainathan call it. “If you want to understand the poor, you have to imagine that you are elsewhere with your thoughts,” they write. “It takes a lot of effort to control yourself. You are absent and quickly get upset. And that every day. ” Thus scarcity – be it time, food or money – leads to ill-advised decisions.
But there is a crucial difference between busy and poor people: you cannot take time off from poverty.
Now that Desiree is unemployed, she takes care of the children, so that the others can work. This way they save money together. Photo: Barbara Doux / Hollandse Hoogte
Two experiments
Just as concrete: how much stupidness does poverty make you?
“Our research shows that you lose about 13 points on IQ,” says Shafir. “That’s like not sleeping at night, or being addicted to alcohol.” And the fascinating thing is: this could have been discovered thirty years ago. “We don’t use complicated brain scans,” says Shafir. ‘They are relatively simple research methods. Economists have studied poverty for years and psychologists have spent years researching cognitive impairment. We have only brought those fields together. ”
It started a few years ago with a series of experiments in an American mall. Passers-by were asked what they would do if their car needed a $ 150 repair; others were asked the same question, but it was a $ 1,500 repair. Would they pay the amount all at once, borrow something, work a little harder, or postpone the repair? While shoppers thought, they were subjected to a series of cognitive tests. As it turned out, people with a low income scored just as well as those with a high income in the minor repair. But if the repair cost $ 1,500, the poor would be worse. Just thinking about a major financial problem affected their cognitive ability.
“Our research shows that you lose about 13 points in IQ, comparable to not sleeping overnight, or being addicted to alcohol.”
“We had corrected for as many other factors as possible in the mall,” says Shafir. “But we were left with one problem: the rich and poor in this study were not the same people. Our dream was to do the same research again, but within one subject. So with someone who is poor at one moment and rich at the other. ”
Shafir found the perfect place for that experiment 13,000 kilometers away, in the districts of Viluppuram and Tiruvannamalai, in rural India. “It was a match made in heaven ,” he laughs. Shafir found that Indian sugarcane farmers receive 60 percent of their annual income in one go, just after the harvest. That means they are rich for part of the year and poor for part of the year . As it turned out, the Indian farmers score a lot worse on the cognitive tests when they are relatively poor. Not because something has changed in their brains – they are still the same farmers – but simply because part of their bandwidth has been seized .
Within the bandwidth
“Combating poverty has enormous benefits that we have been blind to date,” Shafir concludes. More bandwidth means better educated children, lower healthcare costs, more productive employees, you name it. Combating scarcity could even save costs. ” And: the economic crisis not only affected our purchasing power, but also our bandwidth. “Maybe it’s time to measure the gross national bandwidth in addition to the gross national product,” Shafir suggests.
Yet the professor’s solutions are modest. Think of a discount on childcare, help with filling in forms and luminous medicine boxes (to remind you of taking pills). Shafir thinks the holy grail of modern poverty reduction – education – is usually of little use. Arms lack the bandwidth for it.
“In the US, a meta-study has recently been conducted of 120 studies into the effectiveness of workshops for the poor and unemployed,” he says. “They didn’t help.” Note: it does not mean that nothing is learned during such training. The unemployed can learn a lot from it, but it is not enough. Shafir: “Those workshops are like teaching someone to swim, and then throwing them into a raging ocean.”
The holy grail of modern poverty reduction – education – usually does not make much sense. Arms lack the bandwidth for it
Still, education can make sense if they help manage bandwidth, for example. Think of the bureaucracy of the modern welfare state, which is often impossible to get through. You would say that people who do not really need a certain supplement are put off by this paper shop. But it works the other way around: the poorest people with the least bandwidth – those who need the money the most – will ask Fathertje Staat for the least amount of money.
“In the US, there are a lot of schemes that the poor don’t use,” says Shafir. Some scholarships are taken by only 30 percent of those who are entitled to them. And that while research after research shows that such a grant – of thousands of dollars – can make a huge difference. An economist then thinks: it is rational to apply for that grant, they will do it. But it does not work like that. The benefits of the stock exchange do not fall under the tunnel vision of the scarcity. ‘
What to do? Simple actually, says Shafir: helping the poorer students with that paperwork.
Mike and Desiree smoking on the porch in front of their house. They will probably have to leave the house soon because they can no longer pay the bills. Photo: Barbara Doux / Hollandse Hoogte
Free money
But aren’t these far too modest solutions? To use the computer metaphor again: why not just install a few gigabytes of memory with it.A while ago I wrote a big piece about this radical solution. instead of just fiddling with the software?
Shafir looks at me blankly.
“Oh, you just mean giving more money? Yes, that would be great, ”he laughs. “But given the obvious limitations… what you call left-wing politics here doesn’t even exist in the US. Fortunately, it does not necessarily have to be the government that alleviates the scarcity; employers, churches or charities can also play a role. ‘
‘Scarcity not only arises from a lack of income, but also from an excess of expectations’
And there is also something else: money alone is not enough.
“Scarcity is a relative term,” Shafir explains. “It arises not only from a lack of income, but also from too many expectations.” It is actually simple: if you want more money, time, friends or calories, you will also experience a feeling of scarcity. And what you want is largely determined by what the people around you already have. “The growing inequalityRecently I wrote about the relationship between inequality and numerous social problems. in the western world, this is a huge obstacle, ”says Shafir. “If you see people around you with flat screen TVs, then you want one yourself.” As inequality grows, gross national bandwidth shrinks.
At the end of the conversation I ask Shafir what he thinks of Klijnsma’s plans to cut unkempt welfare workers on their benefits. He shakes his head.
‘Terrible. The problem with these people is usually not a lack of motivation, but a lack of bandwidth. That means they need a little help to manage or increase that bandwidth. If you oblige them to take courses instead, or punish them if they don’t dress appropriately, it will be at the expense of their bandwidth. They will spend less time on their children, on their health, on their accounting. If you also punish them by taking their benefits, they not only lose their money, but also more bandwidth. That makes the situation even worse. ”
Less stupid than it seems
A few hours after our conversation, Shafir gives a lecture in debate center De Balie in Amsterdam. Freek Ossel, Alderman for Housing and Districts of the municipality of Amsterdam, is also present. He has not yet read the book – too little time – but seems genuinely interested in the implications for his city’s poverty policy. Ossel says that he recently paid a home visit to a woman who had just bought a new flat screen. She didn’t have enough money to feed her baby.
“That’s quite irrational behavior,” sighs the councilor. Margaret Thatcher would have known: Mrs. suffers from “a fundamental lack of character.”
Still, Shafir has a different idea. “If you are poor and you suddenly get a lot of money, it is only a matter of time before your sister, brother or friend needs anything. In that context, spending the money is the best way to save it. For those living in poverty, this is perhaps less stupid than it seems. “
The psychology of scarcity has turned many a world view upside down. Shafir is therefore a man with a mission. Like his colleague Sendhil Mullainathan, he flies all over the world to tell policymakers about his new science. “If we only thought a little bit in terms of bandwidth, if we were a little more aware of the context of poverty,” he muses at the end of the evening, sipping his diet coke. “That would make a huge difference.
