How being poor can affect your ability to deal with other issues

Suppose you got no sleep last night and have to take an intelligence test today. If you're like most people, you're not going to do so well. Now, suppose you are struggling with poverty and you have to take the same test. How, if at all, will your score be affected?

Harvard University economist Sendhil Mullainathan and Princeton University psychologist Eldar Shafir offer a clear answer - you will probably do pretty badly. In a series of studies, they found that being poor, and having to manage serious financial problems, can be a lot like going through life with no sleep. The reason is that if you are poor, you are likely to be preoccupied with your economic situation, and your mind has less room for other endeavours. This claim has important implications for how we think about poverty and for how we select policies designed to help poor people.

In one experiment, Mullainathan and Shafir went to a large shopping mall and asked a range of participants how they would solve a financial problem related to fixing their car. Participants were randomly assigned to one of two versions. In the "hard" version, the cost involved was pretty high. In the "easy" version, it was low. After explaining how they would solve the problem, people were subjected to intelligence tests.

Here's the remarkable result: when rich and poor people were assigned the easy version of the problem, they performed about the same on the intelligence tests. But when they were assigned to the hard version, with its larger financial stakes, poor people did a lot worse.

Was this a result of some kind of "maths anxiety" on the part of the poor? Evidently not. In a second experiment the authors began with arithmetic questions, using the same sets of numbers as in the first experiment.

In this version, greater difficulty in the initial question didn't produce differences between rich and poor on subsequent intelligence tests. What's going on? The academics have a straightforward answer. If you are poor and you are trying to manage a hard financial situation, your mental resources will be strained, and you are less likely to perform well on other tasks.