Suppose you got no sleep last night and you have to take an intelligence test today. If youâ€™re like most people, youâ€™re not going to do so well on that test. Now suppose you are struggling with poverty and you have to take the same intelligence test. How, if at all, will your test score be affected?
Harvard University economist Sendhil Mullainathan and Princeton University psychologist Eldar Shafir offer a clear answer: You will probably do pretty badly. In a series of studies, they found that being poor, and having to manage serious financial problems, can be a lot like going through life with no sleep. The reason is that if you are poor, you are likely to be preoccupied with your economic situation, and your mind has less room for other endeavors. This claim has important implications for how we think about poverty and for how we select policies designed to help poor people.
In one experiment, Mullainathan and Shafir went to a large shopping mall and paid numerous people, with a diverse range of incomes, to participate in a little test. They began by asking participants how they would solve a financial problem (for example, they might need to spend a certain sum of money to fix their car).
Participants were randomly assigned to one of two versions of the problem. In the â€œhardâ€ version, the cost involved was pretty high (it might cost $1,500 to fix the car). In the â€œeasyâ€ version, the cost was low ($150). After explaining how they would solve the problem, people were subjected to intelligence tests.
Hereâ€™s the remarkable result: When rich people and poor people were assigned to the easy version of the financial problem, they performed about the same on the intelligence tests. But when they were assigned to the hard version, with its larger financial stakes, poor people did a lot worse on the intelligence tests, and rich people looked much smarter.
Was this a result of some kind of â€œmath anxietyâ€ on the part of the poor? Evidently not. Mullainathan and Shafir conducted a second experiment in which they began not with a financial problem but with arithmetic questions, using the same sets of numbers as in the first experiment. In this version of the experiment, greater difficulty in the initial question didnâ€™t produce differences between rich and poor on subsequent intelligence tests.
Whatâ€™s going on here? Mullainathan and Shafir have a straightforward answer. If you are poor and you are trying to manage a hard financial situation, your mental resources will be strained, and you are less likely to perform well on other tasks.