Breaking the cycle of poverty

On Sundays and Mondays, I do handle the editorial pages of the Saudi Gazette where I work as an editor. The Gazette being a subscriber to The New York Times, we get most of our stories from it, to augment the articles written by our in-house columnists. To avoid cramming in the office, I usually select some articles from The New York Times for possible use before I go to work

While selecting possible stories at home before going to the office at noon  today, I came across the article "Escaping the Cycle of Scarcity"  by Tina Rosenberg. It's an interesting article about the habits and mindset of poor people and a  theory that poverty itself has formed that negative habits and bad decision-making among the poor. I picked up parts of that article that I deem may take the immediate interest of the readers of this blog.

Here's the excerpt:

“Scarcity” is a new book that does something that I didn’t think possible: it says something new about why people are poor — and what to do about it.

Here’s what’s not new: Poor people have more self-destructive habits than middle-class people. The poor don’t plan for the future as much. Compared to middle-class people, the poor have less self-control and are quicker to turn to instant gratification. These habits perpetuate a cycle of poverty.

This is proven. The controversy is why it is the case. For conservatives, roughly speaking, these behaviors cause poverty. For liberals, also roughly speaking, poverty in many ways causes these behaviors. It is easy to see how the stresses of poverty weigh in. With eating habits, for example: fruit and vegetables cost more that many unhealthier foods, and might not be available in a poor neighborhood.

But there are behaviors the liberal view struggles to explain. Even when healthy foods are available and made cheap, for example, poor people take advantage of them far less.

Now Sendhil Mullainathan, a Harvard economist, and Eldar Shafir, a psychologist at Princeton, propose a way to explain why the poor are less future-oriented than those with more money. According to these authors, one explanation for bad decisions is scarcity — not of money, but of what the authors call bandwidth: the portion of our mental capacity that we can employ to make decisions.

Worrying about money when it is tight captures our brains. It reduces our cognitive capacity — especially our abstract intelligence, which we use for problem-solving. It also reduces our executive control, which governs planning, impulses and willpower. The bad decisions of the poor, say the authors, are not a product of bad character or low native intelligence. They are a product of poverty itself. Your natural capability doesn’t decrease when you experience scarcity. But less of that capacity is available for use. If you put a middle-class person into a situation of scarcity, he will behave like a poor person.

End of excerpt.

The article, quoting the authors, said that "the same mentality of scarcity that applies to the cash-poor also applies to people who are overly busy and those who are dieting". People who are always "short of time",it said, have the tendency to postpone projects "that are tomorrow's emergency but not today's." It added: "And being hungry captures the mind in a way similar to being poor. People who are on strict diets spend a lot of their bandwidth thinking about food". The article came up with the suggested solutions to the problem, including financial counseling, forced savings like having an employee's paychecks automatically deposited into a savings account, better options for borrowings like setting up credit unions for workers and for employers to pay their workers "a living wage".

It noted "Employers of minimum wage workers often complain that these workers are unprepared for their jobs, unfriendly to customers and distracted. Part of the reason may be that they are devoting little bandwidth to their jobs because they are worrying about how to live on their wages."

Conclusion: "These design shifts — the authors and others propose more of them on the behavioral economics site www.ideas42.org — are a small solution to a very big problem. But the theory is a new one. It needs more study — but part of that exploration will be trying out different models of antipoverty services that take bandwidth scarcity into account. It is far from the only reason people are poor, of course, but what’s particularly useful about the idea of scarcity is that it is overarching; ease that burden, and people will be better able to deal with all the rest".