Scarcity has a profound impact on one’s worldview. Eldar Shafir, a Princeton psychologist, and Sendhil Mullainathan, a Harvard economist, conducted a series of studies on the effects of various forms of scarcity on the poor. They found that poor people and well-off people perform very similarly on tests of fluid intelligence, a generalized measurement that corresponds to IQ. But if each group was forced to consider how to pay an unexpected car repair bill of $3,000 just before taking the test, the poor group would underperform by the equivalent of 13 IQ points, almost one full standard deviation. Just having to think about how to pay a hypothetical expense was enough to derail their performance on a general IQ test and send them from “superior” to “average” or from “average” to “borderline deficient.” Activating scarcity through a hypothetical expense was also found to reduce correct responses on a self-control test from 83 to 63 percent among the less well-off participants, with no effect on the well-off.
I’m no follower of politics, especially in America and I try not to be a fan of any politician as I think we should judge people by their actions and policies rather than fall for a cult of personality.
Nevertheless, Andrew Yang was one of my favorite candidates simply for speaking about automation and how it could impact the future of our economy. In this, one particular point I thought was interesting was how people in financial stress could get stuck in kind of like a “poverty trap”.
If being under financial stress causes someone to make poor decisions with less discipline, then this certainly cascades further into them making poorer choices in other aspects of life. This could have major impacts on things such as physical or mental health, financial stability and could send someone on a downward spiral.
This naturally calls for solutions to break this negative feedback loop such as welfare payments, unemployment benefits and others. Yang proposes a universal basic income, which I feel is going to be inevitable at some point in our future.
