
The poor are more likely to make bad economic decisions - dsr12
http://www.economist.com/news/finance-and-economics/21635477-behavioural-economics-meets-development-policy-poor-behaviour
======
kstrauser
My mom, who grew up in a log cabin and had no running water, was very clear to
distinguish between "poor" and "broke". In her family, "broke" was a temporary
state of being while "poor" was a state of mind. It was OK to be broke because
everyone was in those days, but being _poor_ was unacceptable. Broke people
made their own soap and patched clothes so that kids could be clean and
dressed in school. Poor people didn't bother with either - they'd given up on
the idea of things getting better.

This led to a regionally common saying: poor people have poor ways. The idea
was that broke people saved up for things they needed, while the poor said "I
don't have enough money to pay rent, so I better buy some lottery tickets".

~~~
jandrewrogers
The "broke vs poor" distinction is a good one but many poor people remain so,
at least in part, because they gave up on being anything else a long time ago.
In a sense, they have accepted their place in the universe and made their
peace with it. It takes a lot of energy and discipline to become "not broke".
There is another part to the story:

I think many people do not fully appreciate the prejudice faced by people who
were born into poverty. Growing up poor marks you with affectations of the
underclass that you do not even notice but which everyone else does. These
tend to cause people to discount you regardless of your intelligence or work
ethic, even if you are no longer poor, because they can tell you were "poor
white trash" or similar. Even if you are financially middle-class, you are
still treated as low-status individuals across broad parts of society at large
in many respects. And they know this. If you look at it from the perspective
of someone in poverty, the effort to change your financial position does not
come with a concomitant change in social status and respect.

One of the most consistently successful strategies I've seen for people from
the underclass to greatly expand their opportunities in life is to carefully
and systematically erase any affectations, behaviors, and preferences that
mark them as a member of the underclass. As a society we like to believe that
intelligence, discipline, and hard work are enough for anyone to "make it" but
the reality is that for people born into the underclass you often have to
spend a lot of time finding ways around social prejudices as well.

~~~
MarkMc
Reminds me of a quote from 'Freakonomics' [1]: "After a New York livery-cab
driver named Michael Goldberg was shot in early 2004, it was reported that Mr.
Goldberg was in fact an Indian-born Sikh who thought it advantageous to take a
Jewish name upon immigrating to New York. Goldberg's decision might have
puzzled some people in show business circles, where it is a time-honored
tradition to change Jewish names."

[1] [http://www.amazon.com/Freakonomics-Economist-Explores-
Hidden...](http://www.amazon.com/Freakonomics-Economist-Explores-Hidden-
Everything/dp/0060731338)

~~~
zmonkeyz
A guy at work traced his family back to the first Millers that immigrated from
Germany to the US. When they came to the U.S. they adopted the most American
name they knew of at the time. George Washington Miller and Martha Washington
Miller. :)

------
qrybam
I find this topic very interesting and something that comes pretty close to
home. I come from an eastern-block immigrant background where capitalism and
individualism, ideas that allowed the west to rapidly develop and innovate,
were actively suppressed. My parents were a successful part of the
intelligentsia in their home country, and despite putting in the hours and
working hard, but after successive setbacks, this success didn't translate
that well in the west.

I consider both of them wealthy in many areas but at the same time poor by
western standards. While I'd rate them highly on individualism, I wouldn't
rate them on their ability to capitalise on opportunities. I know many people
who made it out of the old eastern block who have been amazingly successful by
western standards, and it's puzzled me to no end, why intelligent people such
as my parents never made it.

Many possibilities come to mind:

\- Making it out alive was in itself a mark of success for them

\- Their way of thinking did not adapt to the west's and they got stuck in a
"poor" state of mind

\- Bad luck

In any case, I can attest, that changing this way of thinking is not an easy
task.

------
EGreg
I think that, in general, the poker player with a smaller stack just can't
afford to be wrong as many times as the one with a bigger one, and that
affects their decisions. And in a game of imperfect information, they can err
on the side of being cautious (or, in fact, not err at all) and fall behind
more and more in the long term.

A person or company with more resources can try a lot of things, and its
successes will make it seem like it was making the "right" decisions.

------
onetimeusename
The bat and ball question - total price is $1.10 and price difference is $1.00
- was introduced to me from someone who was studying psychology. I correctly
answered him but only because I was trained to very carefully pay attention to
the problem and to attempt to verify the answer before submitting it, so
saying that the bat is $1.00 and the ball $0.10 would lead to the difference
being $0.90 and therefore cannot be correct. This person's area of interest
was not economics however. It seems to me like this problem is more closely
meant to confuse people, hoping they pick up on a few keywords such as $1.00,
$1.10, $0.10, and "difference", and then state the prices as $1.00 and $0.10
because of an assumption in place that most people have and not so much
because they are irrational. Maybe you can say that is evidence of
irrationality but I don't see it that way because people understand the
correct solution and they also are operating on their own assumptions about
it.

~~~
ocb
Yeah, I think that this is irrelevant to the article. It's just a trick
question that plays off our fondness for clean, even numbers.

~~~
VLM
I saw it as a commentary on the foreign advisors sent in to fix everything in
the article.

Consider trust WRT poverty. Specific poor individuals remain poor (in part)
because of people kinda connected to them, playing them with trick questions
and financial "innovation" and manipulating them based on trust. Occasionally
westerners come to visit, even less connected, and say "trust me I've got a
great idea". Well, trusting non-closely-connected people is how they ended up
poor / stuck being poor, so good luck with that.

The analogy is, a nice magazine author from a magazine I trust, wouldn't
intentionally try to screw me with a carefully designed trick linear
programming question... or would they? I guess they just did, didn't they.

------
ocb
Sociologists call this "cultural capital". It's hard to gain status if you
aren't surrounded by examples of people doing the same, informing you how to
improve your lot.

------
anw
The comments on HN are actually more provoking than this article.

For instance, the author states:

> George Orwell said, “Within certain limits, the less money you have the less
> you worry.” He was wrong.

by taking out of context the quote and trying to turn it towards his own
argument.

One point that did stick out was mothers being prompted to play with their
children in ways that help develop and enhance verbal skills. It would be more
beneficial to read studies done that show what kind of actions parents can
take to help their children go farther than they have; how to break the cycle,
as it were.

------
Havoc
Some people just suck at this. As crude as it sounds - its true.

Even among my highly educated finance peers...they can deal with complex
derivatives but somehow they're unable to budget further than a week. How that
is possible...no idea.

------
V-2
Do we entirely rule out the possibility that people who tend to make bad
economics decisions are more likely to become poor?

Because the article doesn't even seem to acknowledge this simpliest of
explanations.

------
aaron695
> For these reasons, some of the simplifying assumptions of economics are not
> always correct: people do not act in every instance in their long-term self-
> interest; they do not weigh up all the costs and benefits before taking a
> decision.

This seems a pretty stupid strawperson statement. Do they seriously think
economists believe this at a micro level?

The rest of the article seems to be lacking any sort of substance.

------
exabrial
Poverty for a lot of the world is not a choice. In America, we are lucky
enough that it does not have to be your only choice if you can make wise
decisions: Get an education, avoid drugs, avoid getting pregnant, work hard,
spend your money on only the things you need to live.

~~~
dominotw
Who would have thought...

------
plicense
Aren't they poor because they've already made (some) bad economic decisions?

~~~
smtddr
[http://www.slate.com/articles/business/moneybox/2013/09/pove...](http://www.slate.com/articles/business/moneybox/2013/09/poverty_and_cognitive_impairment_study_shows_money_troubles_make_decision.html)

Take from it what you will. One thing is for sure, it definitely can become an
endless cycle once those 2 events _(bad decision(s) and poverty)_ happen
within a small time frame. For me personally, having a guilt-inducing high-
salaried SF tech job gives me the peace of mind of not worrying about money;
allowing me to read all kinds of articles/comments on topics like this, as
well as financial & nutritional material - which I assume lead to better
decisions for me & my family.

~~~
ams6110
Why do you feel guilty about having a good job?

~~~
smtddr
That is a long story.

But in short, I was just an average gamer/jpop/anime fan like all my college
friends. We all fantasied about getting to Capcom & SquareSoft. A lot of them
worked at places like Gamestop, from there a few ended up making connections
to get into Namco and SONY as beta-testers. I wanted that too but my parents
drilled it into my head that I must go to school first. I ended up getting a
BSCS hoping it would help me get into beta-testing. From here, a series[1] of
events happened that I don't necessarily believe I earned. I was just at the
right place at the right time and it led me to the tech scene of the bay area.
None of other college friends were able to stay in the gaming scene; layoffs
took 'em out and they lost their connections to get back in. I run into them
from time to time. They either work at a gas-station or unloading trucks for
major grocery store chains.

1\.
[https://news.ycombinator.com/item?id=8245217](https://news.ycombinator.com/item?id=8245217)

I didn't do anything amazing to get that job in at&t in 2001, stepping over
way-more-qualified people who just got laid off in the dotcom meltdown, other
than knowing the right guy at the right time. I didn't do anything special to
get my 4 bedroom house other than the economy was giving away houses around
2003 and AT&T was a big enough name for them to give me a house. I had no
business expecting Pixar to call me when they have a huge[2] stack of resumes
touting superior trained digital artists and that Pixar event changed my whole
life. I still have the email. That Pixar recruiter has no idea the energy &
hope she sparked in me; how it's immensely benefited my family as a result. I
thought if I could get Pixar to look at me, I could do anything. I refinanced
my house to take all the equity out so I could pay for my soon-to-be wife's
nursing school. A few months later, 2007 happened and everyone else lost their
equity and/or house. I still had mine sitting in the bank. When it came time
for a private school payment for the nursing program, it was going to be like
40k-50k or something, instead my wife somehow got into a public college
program. Over 900 people apply and they only take 40. She got it. That ended
up only costing like 6k. I have plenty of money left over, then some kind of
law was passed and I was notified that I could refinance my underwater-
interestOnly house loan. So now I pay less on my mortgage and it's a 30-year
fixed paying principle+interest.

At the end of the day, I just like computers & gaming like all my friends...
but somehow I'm the only one with a crazy salary, a job I love, a house, etc.
Money & opportunity just fall out of the sky for me. btw, this is why I play
the lottery. I figure enough crazy things have happened in my life that I
might actually win.

2\. _" >>It’s perhaps no wonder, then, that the interview process is harsh.
With an estimated 45,000 applications received for each new position, only a
chosen few make it." \---
[http://www.telegraph.co.uk/culture/film/10144531/Monsters-
Un...](http://www.telegraph.co.uk/culture/film/10144531/Monsters-University-
whats-it-like-to-work-at-Pixar.html) _

~~~
kstrauser
Please read this Wikipedia article that seems to have been written about you:
[http://en.wikipedia.org/wiki/Impostor_syndrome](http://en.wikipedia.org/wiki/Impostor_syndrome)

I don't think those companies are throwing money at you just because they
think you're a swell guy with a rabbit's foot. Give yourself a little credit,
would you? :-)

