August 30, 2013
Financial Concerns Can Decrease A Person’s Cognitive Ability
redOrbit Staff & Wire Reports - Your Universe Online
In fact, the researchers report preoccupation with financial issues was equivalent to a loss of 13 IQ points, losing an entire night of sleep, or being a chronic alcoholic, Jha said. This could help explain why poor men and women tend to be more likely to make bad decisions or errors that result in their fiscal issues worsening, added Reuters reporter Kate Kelland.
“Our results suggest that when you're poor, money is not the only thing in short supply. Cognitive capacity is also stretched thin,” Harvard economics professor Sendhil Mullainathan, a member of the international team behind the research, said in a statement. “That's not to say that poor people are less intelligent than others. What we show is that the same person experiencing poverty suffers a cognitive deficit as opposed to when they're not experiencing poverty.
“It's also wrong to suggest that someone's cognitive capacity has gotten smaller because they're poor. In fact, what happens is that your effective capacity gets smaller, because you have all these other things on your mind, you have less mind to give to everything else,” he added. “Imagine you're sitting in front of a computer, and it's just incredibly slow. But then you realize that it's working in the background to play a huge video that's downloading. It's not that the computer is slow, it's that it's doing something else, so it seems slow to you.”
In one series of experiments, researchers discovered immediate monetary concerns had an immediate and adverse impact on the ability of low-income men and women to perform on common comprehension and logic tests. Those individuals exhibited an average decrease in cognitive function equal to a 13-point decrease in IQ.
Likewise, a set of field experiments revealed farmers demonstrated diminished cognitive performance prior to getting paid for their harvest in comparison to after the harvest, when they had access to a greater amount of money. These differences could not be attributed to nutrition, physical exertion, time availability or stress, the study authors explained in a statement.
In addition to Mullainathan, experts involved in the study include lead author and University of British Columbia professor Jiaying Zhao, Eldar Shafir of Princeton University, and Anandi Mani of the University of Warwick. Their work was funded by the National Science Foundation, the International Finance Corporation and the IFMR Trust in India.
“Previous accounts of poverty have blamed the poor for their personal failings, or an environment that is not conducive to success,” said Zhao, who conducted the study as a graduate student at Princeton University. “We’re arguing that being poor can impair cognitive functioning, which hinders individuals’ ability to make good decisions and can cause further poverty.
“These findings fit in with our story of how scarcity captures attention. It consumes your mental bandwidth,” he added. “Just asking a poor person to think about hypothetical financial problems reduces mental bandwidth. This is an acute, immediate impact, and has implications for scarcity of resources of any kind.”