Poverty and Attention Shortage

Over at Marginal Revolution this morning, Alex Tabarrok examines a paper from the Chicago Booth School of Business that looks at why people living in poverty do things against their own interest, like borrow too much money, play the lottery, and save too little:

SMS argue that immediate problems draw people’s attention and as people use cognitive resources to solve these problems they have fewer resources left over to solve or even notice other problems. In essence, it’s easier for the rich than the poor to follow the Eisenhower rule–”Don’t let the urgent overcome the important”–because the poor face many more urgent tasks.

Basically, this says that since I’m not worried about how I’m going to pay my rent next month, or whether or not I’ll have enough money to buy groceries, I can think about what I need to do over the long-term to stay financially stable. People without money spend much of their time figuring out how to address these immediate needs, so saving for the future isn’t as important as paying for the things they need now.

This seems a bit obvious, no? I’d like to know what the researchers think about what comes next after coming to these conclusions. What can we do to help people living in poverty make good decisions that will benefit them over the long-term? That’s a difficult question to address, and it involves these bigger issues of fair pay, affordable housing and SNAP.

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19 Comments / Post A Comment

Megano! (#124)

Rich people don’t have to worry that if their car breaks down or they get sick, they won’t have the money to fix it and go to work, or they won’t get paid because they work hourly with no paid sick days, or they won’t have enough money to pay for rent or groceries because they had to fix their car.

josefinastrummer (#1,850)

I know it’s obvious but maybe some of the “pulled myself up my bootstraps” older folks will read this and be more sympathetic. Both sides of my family were born into poverty and most did rise out of it, but in a different era, when joining the military was expected and you could work your way up at a job forever. Things just aren’t like that anymore, now that people with masters’ degrees are applying to be receptionists and so many companies are moving overseas for even cheaper labor. Ahh capitalism at it’s finest.

Morbo (#1,236)

@josefinastrummer
Capitalism existed back then, too.

theotherginger (#1,304)

@Morbo two important differences: unions were helpful. we didn’t worship cheap stuff in the way we do now, a cause and effect of capitalism (wanting to accumulate, and needing cheaper labour to do so).

deepomega (#22)

@theotherginger “We didn’t worship cheap stuff” – what does that mean? Are you talking about how cheap food and cheap furniture didn’t exist, so you either were rich and had enough or were poor and didn’t?

theotherginger (#1,304)

@deepomega no. I think that people still wanted stuff, because people were people, and, knowing my forbearers, people liked cheap stuff. i just think people had fewer things and they were less crappy. if you were rich, obvs you had more things….

WaityKatie (#1,696)

@theotherginger And, stuff wasn’t as cheap to produce, because unions existed, and we didn’t have the technological capacity to grind out so much stuff, so quickly and so cheap.

deepomega (#22)

@WaityKatie It’s worth noting that the highest union participation rate in the US was about 35%. Now it’s around 12%. Not sure that’s enough to blame “cheap goods” on.

WaityKatie (#1,696)

@deepomega I’m not saying it’s totally responsible, but it was definitely a factor. Unions used to have a huge influence on manufacturing, including in plants that weren’t unionized (via driving up wages and benefits in the industry as a whole, even in non-union companies). Now they have little/none, and most manufacturing is done in places like China, where unions are illegal.

Nick (#1,548)

It’s the same with dieting.

Morbo (#1,236)

An emphasis on life-skills classes as far back as junior high would be a good start. Sex ed, financial literacy, health & nutrition, even home ec.

theotherginger (#1,304)

@Morbo I think more sex ed is just good. always.

josefinastrummer (#1,850)

@Morbo That would be great, so long as you go to a decent school. But my school district would never have the money to do this. Well, they have the money but they choose to spend it on other things, like raises for non-union workers. Also, I think a ton of parents, rich, poor, whatever would have a fit if kids were taught these things in school. Isn’t that what parents are for?

Morbo (#1,236)

@josefinastrummer

I think you under-estimate the populace. I went to a poor school (the all-benevolent state teachers union decided it would be a better idea to funnel state funds into raises for suburban and urban teachers at the expense of rural districts), as defined as 60% or more of kids got free lunch. Ice on the windows in the winter, no air conditioning in the summer.

There, we had sex ed for three weeks on top of a health curriculum, a life skills math class that included how to balance a checkbook, and home ec. No protests, even though it was (and is) a solidly red county.

It is amazing what happens when you require kids to be instructed for eight hours a day.

josefinastrummer (#1,850)

@Morbo We will have to agree to disagree. I am glad your school worked out sex ed and life skills; I agree that every school should have it. But I have lived in several different areas in the U.S. and with that seen lots of different attitudes about what belongs in school and what should stay at home. Again, I don’t agree but I think you are taking your anecdotal experience and assuming the rest of the country will just follow suit and to me, that’s naive.

And what’s this about air conditioning in schools? That exists? I must be really old!

WaityKatie (#1,696)

@josefinastrummer And going to school in the summer?

There’s so much variation among school districts, and it doesn’t even have that much to do with whether the district is rich or poor, in terms of sex ed at least. I went to a poor urban school that had sex ed (sort of) and a rich suburban school where sex ed consisted of “these are all the scary diseases you can get from having sex” with nothing at all about, you know, how to prevent the diseases. Or how to prevent pregnancy. None of that. And none of the schools I went to had anything about financial literacy, although I seem to remember one brief lesson in one about how to balance a checkbook? (clearly it didn’t take in my case).

TARDIStime (#1,633)

My mum has very much been like this since beginning her own business and living off the inheritance from my Grandfather’s death.
She just threw money at her problems rather than trying to find effective solutions for the long-term.
Since her money ran out 2 years ago and I’ve been supporting her, it’s been “I just have to get through this month” – every month.
Since my partner and I signed a lease on a new flat we’re moving into on Sat, she has a) discovered all of her lost superannuation, b) invoiced several clients for outstanding amounts of money and gotten them to commit to paying her within the week (we are talking about several $1000′s) c) organised another place to live.

What I’m saying is, sometimes having plenty of money makes you not bothered with solving your problems, and sometimes, the minute you have to start watching your dollars, the sensible you comes out.

#anecdata

TARDIStime (#1,633)

@TARDIStime #exception to the rule

TARDIStime (#1,633)

@TARDIStime #totally get that impoverished people have WAY more immediate shit to handle than the rich/privileged

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