Poverty is a tax on cognition

In an outstanding lecture at the London School of Economics, Macarthur "genius award" recipient Sendhil Mullainathan explains his research on the psychology of scarcity, a subject that he's also written an excellent book about.

Mullainathan begins by establishing the idea that your cognition is limited -- you can only think about a limited number of things at one time, and when the number of things you have to pay attention to goes beyond a certain threshold, you start making errors. Then he explains how poor people have a lot more things they have to pay attention to. In the UK, we make fun of politicians for being so out of touch that they don't know the price of a pint of milk -- but poor people have to keep track of the price of everything they require. There's no room for error. Spend too much on the milk and you can't afford the bread.

That's just one of the many taxes on the cognitive load of poor people. David Graeber's Utopia of Rules details another: figuring out what rich people are thinking. Poor people who piss off rich people face reprisals far beyond those that rich people can expect from each other or from poor people.

This isn't unique to cash-poverty. Mullainathan asks his audience to recall what life is like when they're "time poor" -- on a deadline or otherwise overburdened. This scarcity can focus your attention, yes: we've all had miraculous work-sprints to meet a deadline. But it does so at the expense of thoughtful attention to longer-term (but equally important) priorities: that's why we stress-eat, skip the gym when our workload is spiking, and miss our kids' sports' games when the pressure is on at work.

The experimental literature shows startling parallels between the two conditions: time scarcity and cash scarcity. This leads to a series of policy proscriptions that are brilliant (for example, when we create means-tested benefits that require poor people to go through difficult bureaucratic processes, we're taxing their scarcest and most precious resource). He also recounts how this parallel is useful in creating an empathic link between rich and powerful people like hedge fund managers and the poorest people alive.

Why does poverty persist? Why do successful people get things done at the last minute? A single psychology--the psychology of scarcity--connects these seemingly unconnected questions. The research in our book shows how scarcity creates its own mindset. Understanding this mindset sheds light on our personal problems as well as the broader social problem of poverty and what we can do about it.

Scarcity: Why Having Too Little Means So Much [Sendhil Mullainathan and Eldar Shafir/Times Books]

Scarcity: a talk for people too busy to attend talks [LSE]

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