Whenever I teach Intro to Psychology, one of my favorite topics to cover is the cognitive revolution. During the continuing revolution, much attention has been paid to human decision-making processes. Most of us like to believe that our intellect, our experiences and our perceived expertise lead us to make rational and well-informed decisions. But, mountains of research clearly show otherwise: human beings are highly irrational decision makers, irrespective of intellectual ability.
The work of Daniel Kahneman and Amos Tversky, two pioneers in the revolution, showed that we tend to overestimate the occurrence of scenarios that most easily come to mind, a phenomenon called the availability heuristic. Many folks, for example, since the events of September 11th, have resisted air travel and opted for other means of (more dangerous) transportation, even though those decisions are statistically irrational.
But more importantly, Kahneman and Tversky also showed that people’s decision making is affected by the manner in which a choice is framed, particularly when it comes to taking or avoiding risk.
As a result, even highly intelligent individuals easily make irrational decisions surrounding risk.
This line of research has subsequently produced another mountain of studies over the past two decades, which have applied the lessons of human decision making to greater systemic issues. The studies have generated enormous implications, particularly with respect to systemic poverty.
The answers have been quite clear: the experience of poverty generates its own psychology.
- The experience of poverty produces a lot of cognitive demands. In short, folks who are poor have to worry about a ton of things that no one else has to, which also increases overall stress. These are worries that many of us take for granted on a daily basis, such as having enough bus fare to get to the grocery store, or choosing between paying the electric bill or heating bill in the winter time.
- The experience of scarcity and cognitive demands has a tremendous negative impact on decision making, particularly with respect to finances. The poor face a constant sense of urgency, and in that urgency, tend to fall victim to making financial decisions that provide immediate short-term relief, but with negative long-term consequences. For example, many are forced to take out payday or short-term emergency loans, which often carry with them exponentially large interest rates.
- The stress of constant scarcity produces similar irrational financial decisions even among those of high intelligence. For example, Shafir and Mullainathan (along with other researchers) showed that even in samples of Ivy League college students, being pressed for both time and resources on various tasks led to a series of irrational decisions, in which they borrowed excessively and repeatedly into greater debt.
- The cycle of systemic poverty is perpetuated by the constant presence of scarcity and cognitive demands, as well as by the backlash that the poor receive whenever they engage in any behavior that is deemed “leisurely” or stress-reducing.
Unfortunately, the lack of empathy produced when one ignores mountains of research is disheartening. Those of us who do not live in poverty have a tendency to vilify the poor and blame them for their supposed laziness, lack of intelligence or willingness to make bad decisions. It is evident, however, that if faced with the same difficult choices, our decisions would be nearly identical.
Systemic poverty will not be cured with egocentrism, nor will it vanish by regurgitating platitudes about so-called “hard work.”