Governance Agenda In Depth

The psychology of poverty

 

There are behavioural constraints that prevent the poor from acting rationally

The standard analysis of poverty, its causes and possible solutions, have focused on its economic, political, and social dimensions. However, the persistence of poverty despite countless examples of well-designed social and economic policies across the world naturally prompts questions about a rethink. Moreover, evidence from recent research in behavioral psychology adds credence to this view.

Conventional wisdom has it that poverty is a symptom of economic and human capability deprivation, both feeding into each other. Further, this is exacerbated by exploitative social institutions and pervasive governance failures. It is argued that all these create dynamics that constrain even the most well conceived welfare and anti-poverty programs.

Silver Spoon

Governments across the world have traditionally sought to provide access to basic health and education, civic infrastructure, and assist with opportunities to improve incomes. More enlightened governments have also tried to mitigate social institutional failures. In recent years, there has been increased attention on governance failures and ways to address them.

A feature of all these interventions is that they have been aimed at the ecosystem – social, economic, and political – that is believed to both cause and perpetuate poverty. We assumed that the human being, who is the target of these initiatives, would automatically respond to the incentives created and work his way out of poverty. But there is now a growing body of evidence that this simplified story is misleading and overlooks important behavioral failures that constrain individuals from making full use of government interventions.

Why do people neglect preventive care even when they know that it could help avoid financially ruinous health outcomes? Why do people prefer unproductive and less remunerative livelihoods even when they have access to better opportunities? Why do people fritter away their scarce finances on wasteful consumption and leisure and not save for their children’s education or on health insurance? Why do people not channel the marginal increases in their incomes to substitute consumption towards more nutritious food items? Why do people fail to immunise their children, indulge in protected sex or drink chlorinated drinking water, even when they could have done so?

A group of behavioural psychologists have over the past decade or so conducted extensive field experiments to explore why people behave in a manner that would appear to be so irrational. Their findings highlight several cognitive biases that influence human decision-making and drive such irrational behavior. One of the most common biases is the tendency to value immediate rewards over larger but delayed rewards. Similarly, people are more averse to losses than motivated to similarly sized gains. Procrastination in decision making — by postponing an expenditure or avoiding a hard decision — is another common behavioural trait.

More fascinatingly, research in neuro-economics show that people struggle to effectively exercise their will-power on a continuous basis. They show that exerting willpower in one area limits our ability to exert it in other areas subsequently in the immediate future. Wasteful expenditures by succumbing to purchases of temptation goods (alcohol and cigarette for eg.) or procrastination and laziness in important tasks or other bad behaviours can be explained by such self-control problems.

Decisions involving trade-offs too require a similar exercise of will power. It also depletes self-control and thereby adversely affects our ability to muster will power for future decisions. In simple terms, people make irrational and often impulsive choices and decisions when their mental energy gets depleted.

Poor people, more than others, are constantly forced to make decisions that involve self-control and trade-offs among competing, equally critical, and mostly basic needs. And they are constrained by extreme scarcity of basic resources – knowledge, money, time, energy and so on. Economists Sendhil Mullainathan and Eldar Shafir metaphorically describe this as a “packing problem”. Poor people struggle to ‘pack’ all their competing needs into their smaller-sized ‘suitcase’ for each resource.

Psychologist Martin Seligman has propounded the concept of “learned helplessness”, whereby people become socially conditioned to behave helplessly in the face of perceived absence of control over their lives. Furthermore, this persists even when opportunities to improve their condition becomes available.

Philosopher Charles Karelis has compared the lives of poor people to that of a person imprisoned inside a glass cage with hundreds of bees continuously stinging him. Resigned to his fate, he would have little incentive to put in any effort to fight them or pay someone to get a few bees out. He becomes responsive to incentives when his condition improves and he is left with having to fend off a manageable number of bees. Accordingly, as the bee population falls, he becomes more likely to put efforts to fend them off or pay someone to remove the bees. Karelis hits the nail on its head when he says, “Poverty is less a matter of having few goods than having lots of problems.”

These human failings are commonplace in all our lives, but rarely as costly as for the poor. Imagine waking up one day without electricity and having to carry buckets of water up three floors; getting breakfast and lunch ready and packing off two kids to school when the maid servant does not turn up; having to walk half a mile to take the crowded public transport because the vehicle has a flat tyre; or reaching late for an important meeting and being snubbed by your boss. Each one of these is a potential cause for stress and ego depletion and its lingering effects invariably cascade over to all other tasks for the day. Now imagine if all of these were to happen together and on a daily basis. It would require immense fortitude to withstand them and cheerfully go about our work.

All these point to very challenging behavioural constraints that prevent people, especially the poor, from acting rationally. It is therefore no surprise that they often appear to give up early and make limited effort to utilise opportunities to improve their condition or more readily succumb to their temptations. We need to therefore explicitly account for these behavioral features in any policy that seeks to address poverty.

Photo: Mauro Cateb

Gulzar Natarajan is a civil servant. The views are personal.

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