Poverty destroys the human spirit, shortening limbs and lives, and reduces human frame into a mechanized automaton, as one writer said. Poverty reduction has and will continue to be a major initiative by organizations and governments, but while many efforts are pushing for access to health care, education, and financial services, recent research shows that psychology might be just as important.
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.
To the researchers, the findings were not that all surprising. It has been known for about a decade or so that engaging in mental tasks reduces your ability to make decisions. A version of this study asks participants to work a difficult math problem and then afterwards gives them the choice of an apple or a cookie. Compared to a control group who did not have solve a puzzle, people who engaged in these kinds of tasks overwhelming choose the cookie. Repeated in other settings, there has been consistent result, willpower is a resource that can be depleted.
As the author of the piece noted,
In both cases, willpower can be understood as the capacity to resolve conflicts among choices as rationally as possible, and to make the best decision in light of one’s personal goals.
The more difficult the cognitive task, the less ability one has to make the best decision. Taking this logic, some economists invented and then deployed a method to combat this decision fatigue, which has shown promise.
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.