Later On

A blog written for those whose interests more or less match mine.

How poverty distorts thinking

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Indeed, extremes seem to distort thinking: the London Whale and those in other bastions of great wealth (I’m looking at you, Goldman Sachs) show equally distorted thinking. Aristotle’s wisdom in advocating moderation—the Golden Mean being the best course—seems particularly apposite.

The results of bad thinking induced by the extremes of wealth are all over the front pages of our newspapers. Here are some recent findings for the extreme of poverty, from Science News, reported by Bruce Bower:

Scarcity — of money, time, food or anything else — focuses the mind on immediate concerns and discourages taking a broader perspective. This “scarcity mindset” helps to explain why poor people often save too little and borrow too much, and it presents policy makers with an opening to encourage better financial decisions among low-income individuals, a new study concludes.

Some researchers, however, regard these findings as vague and far from ready for policy prime time. They suggest that the study’s lab-based results may have little relevance in the real world. And with a nod toward the recent financial meltdown, some note that inadequate saving by the poor ought to be of less concern than financial recklessness on the part of the wealthy.

When money is scarce, each current expense looms large and draws attention away from less pressing expenses, say psychologist Anuj Shah of the University of Chicago and his colleagues. For instance, poor people tend to focus on how to pay for groceries today while neglecting to budget for their next rent payment, the researchers propose in the Nov. 1 Science.

For the study, the group tested volunteers who received generous or limited amounts of time and numbers of tries on lab games. Participants, most in their late 20s and early 30s, were recruited from an online site for job seekers.

“Poor” players spent more time on each choice or action in a game, resulting in lower scores on tests of alertness afterward. Given the opportunity during games, these players borrowed a larger proportion of time or tries against their starting amounts than “rich” players did.

In one experiment, players received 15 seconds or 50 seconds of time per round in a trivia game. Each round consisted of . . .

Continue reading.

Written by LeisureGuy

2 November 2012 at 9:07 am

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