Using a Greater Understanding of Scarcity to Combat Poverty

By Alex Jendrek

GSPIA’s Philanthropy Forum recently hosted Josh Wright, executive director of Ideas42, for a discussion entitled “Using a Greater Understanding of Scarcity to Combat Poverty.” Ideas42 is an organization dedicated to bridging the gap between behavioral science theory and real world issues including energy efficiency, education, economic mobility, and health. GSPIA professor Dr. Sera Linardi and the executive director of Catholic Charities in Pittsburgh, Susan Rauscher, were on hand to respond to and expand upon the discussion of behavioral sciences and poverty from professional experience.

Mr. Wright’s discussion of poverty focused on a human-centric approach that recognizes that “people are affected by the context in which they operate.” To this end, Mr. Wright urged a rethinking of poverty away from conceptualizing the poor as inherently flawed toward an understanding that all people act according to certain cognitive blinders that sometimes prevent forethought and consideration of alternatives. These blinders are a form of cognitive scarcity that when combined with poverty—or economic scarcity—form a source of inhibition; a focus on a primary goal that crowds out other important factors like future or alternative needs. Mr. Wright described how poverty focuses the mind—almost exclusively—on financial scarcity thus leading to economically detrimental behavior like irresponsible borrowing and a focus on immediate rather than long term needs. To this end, the poor need to make what Mr. Wright described as “higher quality decisions” with less time and resources.

Dr. Linardi connected Mr. Wright’s notion of inhibition and cognitive scarcity to her experience with the role of exhaustion among the poor. The extra effort required to save more money or to establish important support networks is exhausting when poverty forces individuals to make difficult decisions to get by on a daily basis. Furthermore, Dr. Linardi described how these highly important social support networks are often smaller for poor people, thus exacerbating the impact of poverty.

Similarly, Ms. Rauscher discussed her first hand experience with exhaustion and inhibition as director of Catholic Charities of Pittsburgh. “Exhaustion and anxiety is very much the nature of people who are dealing with these situations,” observed Ms. Rauscher. Yet in an attempt to avoid social stigma, Ms. Rauscher’s clients often strive to appear outwardly stable until jobs fall through or debt catches up. This cycle is further perpetuated by poor peoples’ reversion to poor spending habits when increasing income—as the result of finding a job—threatens certain subsidies like welfare or food stamps.

On a practical note, Mr. Wright urged policymakers to appreciate the role of “cognitive bandwidth.” For example, Mr. Wright mentioned that job training programs are sometimes ineffective because they are too long and missing one class entails needing to wait sometimes several weeks until new classes open. By then, trainees have often lost much of what they learned in prior sessions. In this example, Mr. Wright suggested that sessions run concurrently with classes offset by a week so that missing one class means a trainee only waits one week to restart training. Another example concerned SNAP distributions. Mr. Wright noted that once-a-month distributions make it difficult for poor people to save owing to inhibition and exhaustion. Thus, Mr. Wright suggested providing the same amount, split into two or more distributions, throughout the month. Through these examples and others, Mr. Wright demonstrated that accounting for cognitive scarcity in policymaking is not impossible and could potentially ease the everyday exhaustion and anxiety that burdens poor people today.

 

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