The Psychology of Poverty | Marketplace.Org

The psychology of poverty | Marketplace.org http://www.marketplace.org/topics/wealth-poverty/psycho...

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Halima Tinson scrapes by well below the poverty line but owns two big-screen TVs. Is it bad decision making or is there something more behind it? Jolie Puidokas/Marketplace LATEST STORIES COMMENTS

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by Jolie Puidokas Marketplace Money for Friday, October 5, 2012 3. Congress calls Chinese companies Huawei STORY and ZTE a threat

4. Small college Grinnell weighs big changes Imagine this: You’re at your child’s baseball game. You’ve got a to financial aid deadline coming up tomorrow and its been a hard day. You want to focus on your child’s game, but you can’t. To some, you may seem 5. Congressional committee suspicious of like a bad parent, but you can’t shake the fact that you have things to Chinese companies' intentions do. This is something we can all relate to. Harvard professor Sendhil Mullainathan claims that poverty has a similar effect on people’s View complete list » minds.

“When faced with financial scarcity, people’s minds keep coming YOU MIGHT ALSO LIKE... back to concerns such as -- how will I pay rent this month,” Sendhil Mullainathan is a professor of Explore Stories that share this feature's economics at Harvard University. Mullainathan said. tags poor, tough choices, psychology, behavioral But doesn’t this apply to everyone? If you have to make a bunch of economics decisions, aren’t you going to be somewhat distracted? What’s so different about poor people being psychologically affected? Mullainathan said the difference is in the 1. Tough Choices: How the poor spend money magnitude and intensity of that effect. 2. Could you live off of $438 a week? “You and I can be busy and we take a vacation from work. You can’t take a break from being poor. You can't

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say, 'Hey I've had enough of worrying about money, I'm just going to be rich for a couple of weeks until I've 3. Is personal responsibility the key to recovered,'" Mullainathan said. ending poverty?

4. Rich and poor in San Diego speak out on However, some poor families do spend their money on things they don't especially need sometimes, like wealth gap televisions. Mullainathan said a big part of this is happiness, which he claims is a scarcity for a poor household. And the things people look for to provide that happiness are individualistic. 5. Falling into poverty: A family’s story

View Complete List » "If someone who is poor says, 'I may not have much money, but for me what's really important is to have a good television so my family can enjoy and watch,' we should be a little careful and recognize that just like we all have individual liberty to make the choices we want, that we not judge too much on that," Mullainathan said. WITH GENEROUS SUPPORT FROM... Marketplace thanks our sponsors for their He also said that poor people have less room for error when making bad financial decisions. continued support in the following categories

"Think of yourself when you're very busy. Even in those busiest moments you spent an hour procrastinating, SUSTAINABILITY COVERAGE when you knew full well you should be working," Mullainathan said. The Kendeda Fund

EDUCATION COVERAGE He said we all make mistakes, the only difference is that some people have the slack to make them and not The Bill and Melinda Gates suffer the consequences. Foundation

Mullainathan said that a lot of the psychological problems poor people face come from lack of planning. ASIA COVERAGE The Starr Foundation “Organizations talk about spending their lives firefighting -- dealing with the next problem without having the The United States-Japan Foundation bandwidth to deal with what is down the pipeline. I think most of the poor have that problem,” Mullainathan said. ECONOMY 4.0 The Park Foundation Mullainathan claims that although planning is a central part of poverty, poor people are better at making financial decisions than the rich and middle class. WEALTH & POVERTY The Ford Foundation

“If you go and stop people at a supermarket and ask them for their receipt and say, ‘Hey how much did you GENERAL SUPPORT just spend,' middle class shoppers have no idea. The poor know what they just spent," he said. The John D. and Catherine T MacArthur Foundation

About the author Jolie Puidokas is an associate producer for Marketplace's wealth & poverty desk.

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