99 problems but the rich ‘aint one

Photo by Flickr user Xavier Donat. Click for sourceI’ve just picked up on this thought-provoking 2008 article from the Boston Globe on a psychological theory of poverty that suggests that traditional economic models just don’t apply to the poor.

The article riffs on an apparently under-recognised book by philosopher Charles Karelis called The Persistence of Poverty: Why the Economics of the Well-off Can’t Help the Poor.

Compared with the middle class or the wealthy, the poor are disproportionately likely to drop out of school, to have children while in their teens, to abuse drugs, to commit crimes, to not save when extra money comes their way, to not work.

To an economist, this is irrational behavior. It might make sense for a wealthy person to quit his job, or to eschew education or develop a costly drug habit. But a poor person, having little money, would seem to have the strongest incentive to subscribe to the Puritan work ethic, since each dollar earned would be worth more to him than to someone higher on the income scale. Social conservatives have tended to argue that poor people lack the smarts or willpower to make the right choices. Social liberals have countered by blaming racial prejudice and the crippling conditions of the ghetto for denying the poor any choice in their fate. Neoconservatives have argued that antipoverty programs themselves are to blame for essentially bribing people to stay poor.

Karelis, a professor at George Washington University, has a simpler but far more radical argument to make: traditional economics just doesn’t apply to the poor. When we’re poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.

I also a found a short piece on NPR where Karelis discusses the idea further and I was thinking that as an essentially psychological theory, the general idea must have been tested before.

However, I’m having trouble finding anything directly relevant, although I’m certainly not an expert in the area so maybe I’m looking in the wrong places.

Link to Boston Globe article ‘The sting of poverty’.

3 thoughts on “99 problems but the rich ‘aint one”

  1. Sendhil Mullainathan at Harvard and co-authors have some interesting work in behavioral economics related to how deprivation affects decision-making. There are quite a lot of experimental observations.
    Maybe unlike Karelis, the larger point is that everyone has the tendency to make poor decisions under scarcity. Sendhil’s good at pointing out how time scarcity, etc. lead to poor decisions in daily life.
    There’s an entertaining bloggingheads with Glenn Loury (http://bloggingheads.tv/diavlogs/26877), academic work on development and psychology here (http://www.economics.harvard.edu/faculty/mullainathan/files/lens%20of%20psychology.pdf), and various TED talks, etc.

  2. One does not need to be poor to experience this effect. When various annoying tasks happen to pile up, I’m much less likely to do anything about any of them, as reason would demand, and more likely to watch a movie or read a book instead of working on solving problems, and hit the sheets earlier, perhaps a bottle too.
    I know this is not an universal behavior, but it’s far from rare.

  3. Click to access Aye%20effect%20of%20poverty.pdf

    Click to access 1994_CD_Laub.pdf

    It would appear that this is an extension of the basic study of why the poor buy lottery tickets, and why the poor are substantially more likely to divert into patterns of delinquency. Simply put, the world that poorer people live in is different. Roy F. Baumeister also looked at this a bit, I think, in looking at why short-term rewards were more influential for people in poverty, who seldom get to experience the longer-term rewards.
    I think this field of study does exist, but that this is the point where we are arriving at a consensus on the fact that poverty itself changes people, and until we also address those factors, poverty will remain. It’s the realisation that people are not just waiting for opportunity to rise- they are also doing the best they can with what they’ve got, and that isn’t equipping them for the different realm of choices and social norms that enable long-term responsibility.

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