Drawing on cutting edge research from behavioural science, Sendhil Mullainathan and Eldar Shafir argue in their new book, ‘Scarcity: Why having too little means so much’, that poverty impacts on poor people’s ability to make decisions. They come to this conclusion through exploring how ‘cognitive capacity’ can be consumed by focusing on what is scarce in life; whether it is money, food, friends or time.
Cognitive capacity is the amount of information the brain is capable of retaining at any particular time. How much cognitive capacity is being used towards a particular task is referred to as ‘cognitive load’. When your cognitive load is high, i.e. when you are consumed by financial stress, they argue that you are less able to focus on other important tasks and can make poor decisions as a result.
For a quick summary of the research, we recommend you read the Guardian article “Poverty saps mental capacity to deal with complex tasks, says scientists”.
What does this mean for policy makers?
As policy makers, we are inherently concerned with issues of economic disadvantage and designing programs and policies in response. However, we may not take into consideration whether these programs are actually imposing more cognitive burdens on those under financial stress.
Filling out long forms, preparing for a lengthy interview, deciphering new rules, or responding to complex incentives all consume significant cognitive resource. So, policy makers should be aware of imposing further cognitive taxes on low-income earners, making a strong case for simpler processes and communications from government.
If we want to design interventions that are effective and that do not impose unnecessary cognitive burdens then we need to ensure they are simple, such as:
- Smart defaults (e.g. pension opt-outs)
- Pre-filling of forms (e.g. auto populated university application forms)
- Planning prompts (e.g. to pay bills)
- Reminders (e.g. health check-up text message reminders)
The findings from this research reinforce a wider lesson from Behavioural Insights, which is that if you want to make a policy more likely to succeed then you need to make it easy, attractive, social and timely (EAST). We argue for this across all policies, however this new research suggests that ‘making it easy’ is especially critical for those under financial stress.
S. Mullainathan, E. Shafir, Scarcity: Why Having Too Little Means So Much (Henry Holt, New York, 2013).
A. Mani, S. Mullainathan, E. Shafir, J. Zhao, Poverty Impedes Cognitive Function.