Poor people often do things that are against their long-term interests such as playing the lottery, borrowing too much and saving too little. Shah, Mullainathan and Sahfir have a new theory to explain some of these puzzles. SMS argue that immediate problems draw people’s attention and as people use cognitive resources to solve these problems they have fewer resources left over to solve or even notice other problems. In essence, it’s easier for the rich than the poor to follow the Eisenhower rule–”Don’t let the urgent overcome the important”–because the poor face many more urgent tasks. My car needed a brake job the other day – despite this being a relatively large expense I was able to cover it without a second’s thought. Compared to a poorer person I benefited from my wealth twice, once by being able to cover the expense and again by not having to devote cognitive resources to solving the problem.
SMS test the theory with small experiments in which people are asked to play simple games. Poverty is simulated by giving some players fewer game resources. Players in the “poverty” conditions are then shown to devote more attention to the current round and less attention to future rounds, including borrowing more from future rounds.
More here at Marginal Revolution. Most people have a problem of tending to the urgent over the important, but it may be that poverty exacerbates the effect. This and an earlier post on The Persistence of Poverty strike me as having advanced our understanding of the harmful effects of poverty.
I understand now why my grandmother and mother always told me to tend to my health when I was younger. It was years of accumulated wisdom on their part as to the attention-depleting effects of being ill.