The Star Beacon; Ashtabula, Ohio

World, nation, state

August 30, 2013

Financial stress may hit your brain and wallet

(Continued)

WASHINGTON — Mullainathan and colleagues tested the same 464 farmers before and after the harvest and their IQ scores improved by 25 percent when their wallets fattened.  

“It’s a very powerful effect,” said study co-author Eldar Shafir, a Princeton University psychology professor. “When you are dealing with budgetary finances, it does intrude on your thinking. It’s at the top of your mind.”

In the New Jersey part of the study, the scientists tested about 400 shoppers, presenting them with scenarios that involved a large and a small car repair bill.  Those with family incomes of about $20,000 scored about the same as those with $70,000 incomes on IQ tests when the car bill was small. But when the poorer people had to think about facing a whopping repair bill, their IQ scores were 40 percent lower.

Education differences can’t be a major factor because the poor only scored worse when they were faced with big bills, Safir said. The more educated rich may have learned to divide their attention, but that wouldn’t be a significant factor, he said.

The study’s authors and others say the results contradict long-standing conservative economic social and political theory that say it is individuals — not circumstances — that are the primary problem with poverty. In the case of India, it was the same people before and after, so it can’t be the person’s fault.

“For a long time we’ve been blaming the poor for their own failings,” Zhao said.  “We’re arguing something very different.”        

Poverty researcher Kathryn Edin of Harvard, who wasn’t part of the study, said the research “is a big deal that solves a critical puzzle in poverty research.”

She said poor people often have the same mainstream values about marriage and two-parent families as everyone else, but they don’t seem to act that way. This shows that it’s not their values but the situation that impairs their decision-making, she said.

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