Does Poverty Reduce Free Will? Or: The Idea That Being Poor Leads to Bad Decision-Making And Makes You Poorer.

So often in this country, political debates center around the issue of self-control.If poor people would just stop spending their meager resources on new sneakers and televisions,the thinking goes,then maybe they could join the middle-class.James Holmes, a policy analyst at the New America Foundation, recently put forward an interesting theory over at the New Republic: poverty actually reduces free will.

The idea of depletable self-control has been around for awhile now. Basically, exerting willpower in one area makes it harder to exert it in others, or in other words, you can essentially “use up” your willpower. In 1998 a study asked people to either resist sweets or veggies and then solve a geometric puzzle. Those who had to deal with the stress of resisting the sweets gave up about twice as quickly on the puzzle. Roy Baumeister, one of the men behind the study, put it simply: "After you exert self-control in any sphere at all, like resisting dessert, you have less self-control at the next task."

So, what does this have to do with poverty? A lot, actually. Mostly because poor people end up exerting a lot of mental energy on almost every financial decision.

Purchasing decisions that the wealthy can base entirely on preference, like buying dinner, require rigorous tradeoff calculations for the poor. As Princeton psychologist Eldar Shafir formulated the point in a recent talk, for the poor, “almost everything they do requires tradeoff thinking. It's distracting, it's depleting … and it leads to error.” The poor have to make financial tradeoff decisions, as Shafir put it, “on anything above a muffin.”

Most well-off people don't have to exert willpower on basic things; if they want a soda with their Subway sandwich at lunch, they simply buy it. But the poor don't have that luxury. The decision on whether or not to buy that soda is much more stressful to someone making $7.25 an hour than it is to someone making $40 an hour.

Many of the tradeoff decisions that the poor have to make every day are onerous and depressing: whether to pay rent or buy food; to buy medicine or winter clothes; to pay for school materials or loan money to a relative. These choices are weighty, and just thinking about them seems to exact a mental cost.

That mental cost results in poor economic decision-making later on. In developed countries, social programs and things like pensions help ease the burden. In developing countries, none such safety nets exist, making it even more imperative that people save. The irony, of course, is that people are even less willing to save after enduring the constant stresses of making tough financial decisions.

So, how do we combat this? One, you can create things like the SEED (Save, Earn, Enjoy Deposits) accounts of the Green Bank of Caraga in the Philippines, which sets restrictions on people's accounts, like requiring a certain amount of savings before money can be withdrawn. Another way is to attach restrictions to government money–like the wildly successful program in Brazil that gives the poor a monthly stipend for every child that stays in school.

At the very least, studies like these should drive home just how difficult fighting poverty can be and how the mental barriers to prosperity are just important to address as the institutional ones.

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