What poverty does to people's thinking

The American Psychological Association website has a fascinating interview with the Princeton University psychology and public affairs professor Eldar Shafir.

Professor Shafir talks about his research into the degree to which people's minds are less efficient when they feel they lack something - whether it is money, time, calories or even companionship:

One of the classic errors that poor Americans are criticized for is taking "payday loans," those very high-interest loans that at the moment seem like a good solution but two weeks later cause them to owe high interest. So, we decided to run a study with Princeton undergraduates, who nobody would say are unsophisticated. 

Working with Anuj Shah, we had them play a "Family Feud"-like computer game and randomly assigned them to be rich or poor in the amount of time they had to answer questions, giving the rich 50 seconds per round and the poor 15 seconds. Half of the participants were also given the option to borrow time, but every second they borrowed cost two seconds from the entire bucket of time they had available for the game. 

We found that when people were rich with time they were very judicious, needed it less, and only very occasionally took a loan. But when they were time-poor, these sophisticated Princeton students grabbed these available loans to try and do well in the game and ended up making less money than the time-poor students who weren't given the option to borrow. These students made the same mistakes that we observed among poor people. 

What surprises you most about scarcity? 

What's most striking is that these findings make a very strong case for the idea that people who look very bad in conditions of scarcity are just as capable as the rest of us when scarcity does not impose itself on their minds. 

What's interesting about a lot of behavioral research is that we don't have full intuitive access to it. For example, research on the use of cellphones in cars has been striking because we all have the illusion that we can manage calls just fine. But the findings are clear that when you are on a cellphone in the car, even when it's not hand held, your reaction time is comparable to being legally drunk. That's not intuitively available to us because most of us just don't feel it. 

The same thing happens here. People know they're busy and distracted, but the impact and the consequences of that distraction are much more impressive than we realize