Poverty and the all-consuming fretting that comes with it require so much mental energy that the poor have little brain power left to devote to other areas of life, according to the findings of an international study published on Thursday.
The mental strain could be costing poor people up to 13 IQ (intelligence quotient) points and means they are more likely to make mistakes and bad decisions that amplify and perpetuate their financial woes, researchers found.
“Our results suggest that when you are poor, money is not the only thing in short supply. Cognitive capacity is also stretched thin,” said Harvard economist Sendhil Mullainathan, part of an international team that conducted the study.
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Understanding Society: Poverty and economics
The neoclassical free market purists stand at the other end of the garden. The economists of the Chicago School put primary emphasis on the beneficent effects of untrammeled market behavior, and they give little attention to the “market imperfections” that poverty and deprivation represent. (The word “poverty” does not occur in the index of John Van Overtveldt’s good intellectual history of the Chicago School, The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business.) Poverty seems to be viewed as a normal and fair result of the workings of market institutions: some people make large contributions and earn high income, and others make small or zero contributions and earn low income.
The closing chapter of Milton Friedman’s Capitalism and Freedom is entitled “The Alleviation of Poverty.” Here Friedman admits that poverty is a problem, but conceives of only two solutions: private charity (which he agrees will not work in a large complex society) and direct transfers from tax revenues to payments to the poor (which is limited by the willingness of citizens to provide taxes for this purpose). The mechanism he prefers is a negative income tax: persons with incomes below a given threshold would receive payments determined by their income levels. “In this way, it would be possible to set a floor below which no man’s net income (defined now to include the subsidy) could fall” (192).
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What parts of the global income distribution registered the largest gains between 1988 and 2008? As figure below shows, it is indeed among the very top of the income distribution and among the emerging global middle class, which includes more than a third of the world’s population, that we find most significant increases in per … Continue reading »
In addition to the tax increases and broad federal spending cuts (known as “sequestration”) scheduled to take effect at the end of this year, the emergency unemployment benefits system is also expected to come to an end. It doesn’t get as much attention as the defense cuts or the tax increases, but the end of … Continue reading »
Reblogged from GDNet Blog: Combating poverty and inequality is on the top of priorities for many development organizations. This is why the Latin American and Caribbean Economic Association (LACEA), the Inter-American Development Bank and the World Bank came together to launch their joint initiative “Network on Inequality and Poverty”. The objective of the initiative is … Continue reading »
Officially, the U.S. poverty rate in 2011 was 15 percent exactly, a 0.1 point reduction from 2010. But as I pointed out when that number was released in September, that figure doesn’t mean a whole lot. The official poverty threshold is the amount of money a family of three would have to make to spend … Continue reading »
A study shows how that anti-poverty programs are much more popular when socially well-connected citizens are the first to know about them Continue reading »
Four out of five US adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives Continue reading »
A newly published study indicates that today, more than 40 percent of migrants in retirement age are affected by poverty Continue reading »
Over the last two decades, growth in most Asian economies has translated into significant reductions in poverty; nevertheless, Asia is still home to the largest number of the world’s poorContinue reading »
Study by Prudential finds many people are facing a bleak financial outlook, with 14% relying solely on state pension One in five people retiring in Britain in 2013 will fall below the income poverty line according to a study by Prudential, which also found that nearly a quarter of women will enter retirement entirely dependent … Continue reading »
Millions of Italians cannot afford to heat their homes properly or eat meat as their country is racked by recession and soaring unemployment, said a report which found the number of people considered seriously deprived had doubled in the past two years. The findings from national statistics institute ISTAT underline the scale of the challenge … Continue reading »
Poverty is growing faster in the suburbs than anywhere else in the United States, soaring 64% over the past decade. That was more than twice the growth rate of the urban poor population, according to the Brookings Institution, which has released Confronting Suburban Poverty in America. There are now almost 16.4 million suburban residents living … Continue reading »
Income inequality increased by more in the first three years of the crisis to the end of 2010 than it had in the previous twelve years, before factoring in the effect of taxes and transfers on income, according to new OECD data. The analysis says that the welfare state has cushioned the blow for many … Continue reading »
An explosion in poverty-related hunger in Britain is putting the government in danger of failing to meet its international human rights obligations to its most vulnerable citizens, charities have warned. The UK is a signatory to a UN economic and social rights convention that sets out minimum standards of access to food, clothing and housing. … Continue reading »
The 100 richest people income of last year would be enough to end extreme poverty four times over says OXFAM
The vast fortunes made by the world’s richest 100 billionaires is driving up inequality and hindering the world’s ability to tackle poverty, according to Oxfam. The charity said the accumulation of wealth and income on an unprecedented scale, often at the expense of secure jobs and decent wages for the poorest, undermined the ability of … Continue reading »