Keeping people poor is a political option we can no longer afford, with so much human potential wasted. We need a universal basic income
Why do poor person build so many bad decisions? Its a harsh question, but look at the data: poor people borrow more, save less, smoke more, exert less, drink more and eat less healthily. Why?
Margaret Thatcher once called poverty a personality defect. Though not many would go quite so far, the view that theres something wrong with poor people is not exceptional. To be honest, it was how I thought for a long time. It was only a few years ago that I discovered that everything I supposed I knew about poverty was wrong.
It all started when I accidently stumbled on a paper by a few American psychologists. They had travelled 8,000 miles, to India, to carry out an experiment with sugar cane farmers. These farmers collect about 60% of their annual income all at once, right after the harvest. This means they are relatively poor one part of the year and rich the other. The researchers asked the farmers to do an IQ test before and after the harvest. What they discovered blew my intellect. The farmers scored much worse on the tests before the harvest. The effects of living in poverty, it turns out, correspond to losing 14 points of IQ. Thats comparable to losing a nights sleep, or the effects of alcoholism.
A few months later I discussed the theory with Eldar Shafir, a prof of behavioural science and public policy at Princeton University and one of the authors of this study. The reason, put simply: its the context, stupid. People behave differently when they perceive a thing to be scarce. What that thing is doesnt much matter; whether its time, fund or food, it all contributes to a dearth mentality. This constricts your focus to your immediate inadequacy. The long-term view runs out of the window. Poor people arent stimulating dumb decisions because they are dumb, but because theyre living in a context in which anyone would construct dumb decisions.
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