Changes in preferences and everyday thinking in the context of poverty

Anuj Shah

Disparities

Missed appointmentsPoor medical adherenceFewer words spoken/less reading to kidsHarsher, less consistent disciplineLess productive at workMarital instabilityBorrow too much, save too littleMore vulnerable to fraudGet less sleepLower self-esteemGreater stress

Poverty impedes cognitive function

A beer on the beach

Resort Grocery0

0.5

1

1.5

2

2.5

3 Chart Title

WTP (

$)

Thaler (1985)

Poor decisions

Our decisions are often swayed by normatively irrelevant factors.

+

N = 578

Study 1: A beer on the beach

Low Income High Income0

1

2

3

4

5

6

7

8Resort

Grocery

WTP (

$)

Replication

N = 1898

Low Income High Income0

1

2

3

4

5

6

7

8Resort

Grocery

WTP (

$)

Replication

N = 145

Low Income High Income0

1

2

3

4

5

6

Bar People

WTP (

$)

This is insight guides the use of “framing effects” in policy.

Having more means…

Having more means…

Having less means…

Scarcity and context

Abundance: Scarcity:

N = 578

Study 1: A beer on the beach

Low Income High Income0

1

2

3

4

5

6

7

8Resort

Grocery

WTP (

$)

Study 2: Reasons

Location Tradeoffs0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Low Income

High Income

N = 102

Study 3a: Proportional thinking

$50 $50 $50

$300 $500 $1000

Tversky & Kahneman(1981)

Study 3a: Proportional thinking

Percentage Tradeoffs0

0.1

0.2

0.3

0.4

0.5

0.6

Low Income

High Income

N = 238

Study 3b: Proportional thinking

Low Income High Income0

10

20

30

40

50

60

70

80

90

100$300 $500 $1,000

Perc

enta

ge T

raveling f

or

Dis

count

N = 702

Study 4: Mental accounts

“that’s expensive!” “that’s not so bad.”

Morewedge et al. (2007)

Study 4: Mental accounts

N = 259

Low Income High Income1

2

3

4

5

6

7

8

9

10

11

Small Account

Large Account

Expensi

veness

Study 5: Caloric scarcity

Study 5: Caloric scarcity

N = 259

Dieters Non-dieters1

2

3

4

5

6

7

8

9

10

11

Small Account

Large Account

Fatt

enin

g

Study 6: The feud

Study 6: Expensiveness

Poor Rich123456789

1011

Small

Large

Expensi

veness

N = 73

Implications

Certain policy levers may not be as useful in nudging the poor

Reconciling economic and psychological views of decision making

A possible reason for diminished bandwidth

Some capacities are honed, rather than diminished

Honed capacities

Tradeoff thinkingPreference stability

Price knowledge

Alertness

Careful spending

Honed capacities

Tradeoff thinkingPreference stability

Price knowledge

Alertness

Careful spending

Please don’t fall asleep.

bed

rest

tired

dream

wake

snooze

blanket

doze

slumber

awake

SLEEP

snore

nap

lady

male

strong

woman

beard

handsome

muscle

doze

father

uncle

MAN

person

son

The fabric of thoughts

bed

rest

tired

dream

wake

snooze

blanket

doze

slumber

awake

SLEEP

snore

nap

lady

male

strong

woman

beard

handsome

muscle

doze

father

uncle

MAN

person

son

Study 7: Seeing what isn’t there

pay

rent

cash

dollar

coin

utilities

grocery

gas

expense

loan

MONEY

bills

phonelady

male

strong

woman

beard

handsome

muscle

doze

father

uncle

MAN

person

son

Man Money0

0.05

0.1

0.15

0.2Low IncomeHigh Income

N = 125

$

Three questions

Do the poor spontaneously think about money?

Are these thoughts hard to suppress?

Do these thoughts interfere with how we enjoy experiences?

Study 8: A visit to the doctorImagine that you have been feeling sick lately and finally decide to go see a doctor about it…The doctor explains that you have a serious condition that requires immediate attention. The good news, however, is…you are virtually guaranteed to make a full recovery...The doctor writes several prescriptions…You will also need to make several appointments…

What would be on your mind or how would you feel as you hear this news… What are three things you would think about or feel?

“wife son coworker”“scared afraid worried”

“relief hope joy”

“cost family work”

Study 8: A visit to the doctor

Low Income High Income0

0.020.040.060.080.1

0.120.140.160.180.2

Proportion mentioning money-related thoughts

N = 198

Study 9: Distracted driving

Try not to think about how much you drive each month.

Try not to think about how much you spend on driving each month.

Study 9: Distracted driving

Driving Spending0

1

2

3

4

5

6

7

8

Low Income

High Income

# o

f in

tru

sio

ns

N = 568

Study 10: Hedonic interference

Study 10: Hedonic interference

Poor Rich1

2

3

4

5

6

7up front

paygo

En

joym

en

t

N = 297

A cognitive psychologist’s view of poverty

Less susceptibility to framing effects

Money-related thoughts are highly accessible or top of mind