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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via Poverty reduces brain power: US-India study – The Times of India.
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).
Chosen excerpts by Job Market Monitor. Read the whole story at
via Understanding Society: Poverty and economics.
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