- Shin Suzuki
- From BBC News Brazil to Sao Paulo
It’s a familiar picture these days: budgets are tight and losses are constant. Then unexpected expenses arise. The car broke down and the repair will cost much more than expected.
The brain must find a way out: Is it delaying certain bills to secure the mechanic’s money? Is he applying for a loan to help with already strained finances?
Whichever path you choose, efforts to get out of financial trouble – or just to survive – have important consequences for cognition.
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This is explained by behavioral scientist Eldar Shaffer of Princeton University in the United States and economist Sindel Mullainatan of Harvard University in a book published in 2013 entitled Scarcity – a new way of thinking about the lack of resources in people’s lives and in organizations (Best Commercial Publisher ).
The duo use the term “high mental capacity” to describe the ability of the brain in such situations.
A computer with too many open programs will have difficulty processing information. The internet will be slow. Videos get stuck all the time.
Likewise, a boss full of financial problems will have low performance: he will be burdened and lead to poor decisions.
“Mental broadband is very limited. Often you have to focus on the urgency of the present moment and do it subtly: you solve the problem. But if this movement happens all the time, it will never be enough. You will ignore other areas in Brazil,” Shaffer told BBC News Brazil. your life.”
To measure the effect on intelligence, Shaffer and Mullainathan conducted an experiment similar to the situation presented at the beginning of the text.
They went to a shopping center in the American city of New Jersey and chose people of different economic conditions. Participants were initially faced with having to pay $300 (182,845 CFA) for a broken car.
Then Raven’s tests, which measure participants’ fluid intelligence, were applied. The results showed that there was no significant difference between the rich and the poor.
However, when the value increased from $300 to $3,000 (182,826 to 1,828,260 CFA francs) in the default mode shown, they found that the poorest had a very significant drop in the score (-13) measured by the method.
Imperfect intelligence can, of course, be critical to decision-making – especially in a social context where there is no room for maneuver.
“If you make a mistake, if you make a bad investment, if you forget to pay a tax, it is just an inconvenience. But life goes on. If you are poor and make the same mistakes, the price you have to pay in life will be much higher. There is less room for mistakes, so you become Life is more complicated, and more difficult, ”says the psychiatrist.
Poverty and debt have been consistently attributed to a lack of financial responsibility and the discipline of saving.
Influential financial coaches and even the economy minister are echoing this. In an interview with Folha des Paolo newspaper, Paulo Guedes explained that “the rich invest their resources, and the poor consume everything.”
In 2019, a survey conducted by the National Confederation of Store Managers (CNDL) and Credit Protection Service (SPC Brasil) indicates that 67% of Brazilian consumers are unable to save anything of what they earn.
Of this total, 40% justified that their income is too low to allow them to save.
But many may ask: Where does individual effort, personal responsibility, come from to get out of poverty?
“Personal responsibility is important,” Shaffer says. “But it’s not enough if the context is working against you.”
“We always give an example of airline pilots. If the cockpit is well designed, well built, and the pilot is responsible and has a good knowledge of the trade, then the leadership will go well. If there are structural problems in the cockpit, capable and responsible pilots can shoot down an aircraft” .
The behavioral scientist claims that low-income people actually develop survival wisdom against adverse conditions. “But it is only a matter of time, or bad luck or circumstances, before the fall recurs again.” The brain will make a wrong move at some point.”
“One of the key points of poverty is that in times of scarcity, whether it’s money or time, we tend to make impulsive, instinctive and generally less rational decisions,” says Flavia Avila, an expert in behavioral economics and founder of the consultancy InBehavior Lab.
“It used to be said that the poor lack information. But I say that information alone is not enough to generate actions. If that were the case, everyone would be a millionaire. We have a lot of information. Information L rarely generates a change in behaviour.”
Avila cites Nobel laureate Daniel Kahneman, author of Fast and Slow: Two Ways of Thinking (Editora Objetiva, 2011), who popularized a decision-making model in which scarcity leads to hasty judgments — and ultimately to poor decisions.
She explained that the model is a simplification of a more complex brain process, but she explains that “in System 1 there is more instinctive decision-making and in System 2 there is more decision-making. Slower and more thoughtful. When you are deficient, 95% of the time it is of the type 1. “
Shaffer usually illustrates the situation with a picture of “a fire, where you don’t ask how much water a bucket of water you need to put out the fire that’s engulfing your house.”
Fernando Fonseca, an economist and professor at the Federal University of Tocantins, studied in his doctoral thesis the ability to save (or not) for people living in extreme poverty in Pico do Papagayo, a region in northern Tocantins.
In October 2021, Brazil had 27 million people living in poverty (income less than or equal to 290 Brazilian reals or 37,349 CFA francs per month), according to a survey by FGV Social.
Respondents in the Fonseca study had precarious economic incomes and difficulty accessing education and basic sanitation.
The researcher analyzed the “impatience rate” of this group when asking questions such as “Would you rather get 100 R$ (12,879 CFA) today or 150 R$ (19,320 CFA) in a week?”
One perception has been that decision-making is guided by “talent bias”.
“These very poor people who work very hard have a very short time horizon, and they do not see themselves in the future. So this is not to say that these expenses are irrational, but that given the excessive anxiety they raise, whether it is food, housing or instability, it cannot be These people have any kind of planning,” explains Mr. Fonseca.
Despite everything, an effort was made to economize. Since this sector is inaccessible to “non-bank” banks, families in northern Tocantinines experimented with a type of non-cash savings: raising medium and small animals.
“To meet an immediate need. The animal has cash, although it may be sold for less than expected. This is driven by the period of starvation and severe drought in this region.”
In a way, our lives would be easier if it was true that poor people deserve to be poor because they don’t put in enough effort or they don’t have the capabilities, says Shaffer, of Princeton. But no: I think there are people who end up in poverty even if they have the merit and capabilities. And intelligence, life seems unfair.”
“The data we have shows that the poor are very focused and have a lot of knowledge about buying and how to get the lowest price. But if you focus on securing the next day or next week, you will never think about next year. And then everything becomes a huge challenge,” he says.
The Israeli psychologist believes that the findings of behavioral economics allow us to be “optimistic that public policies can make a difference, through actions in education, transportation or even minimal income.”
In other words, ensuring a minimum standard of living eases the burden which is added to ‘mental broadband’.
“And it doesn’t just have to be through the government. Big companies may realize that providing better conditions for their employees leads to fewer mistakes in the workplace. In other words, it helps the company itself, at the company level, to provide minimum acceptable standards of work.
For Flavia Avila of InBehaviour Lab, poverty and extreme poverty affect “society as a whole: they affect the economy, the climate, and even less real issues. The idea that social inequality is harmful to successful businesses is now well established.”