Decision Making Under Poverty

Understanding how the poor make their decisions is important for many reasons. It allows us to better target our economic policies such as poverty alleviation, social welfare, literacy etc. Since poverty (and income inequality) is such a large part of our society, it also helps us better understand our society and its values.

There are three different narratives about the link between decision making and poverty.

  1. Low intelligence leads to poor decision making, causing poverty. This is arguably the most comforting view, from the perspective of the well-to-do. There is an assumed correlation between low IQ and poverty. It is easy to see this as being a causal relationship: poor intelligence leads to poor poverty.
  2. Poverty leads to low intelligence, causing poor decision making. Certainly, there is a known causal link between parental poverty and childhood malnutrition, leading to lower IQ scores for the children, which translates into lower incomes in their adulthood. There is also evidence to suggest that poverty has an impact on social relationships, which could also affect a child’s development and therefore future economic prospects. It is also an unfortunate fact that poverty has a significant impact on people’s IQ (13 points), attributable to a cognitive burden of working with their limited resources.
  3. Independent of intelligence, poverty can lead to poor decision making. This is the rather surprising narrative that is best illustrated by the quote in this post in the Atlantic. The limited resources and bleak prospects mean that the poor may disregard their long-term interests in favor of short-term interests. This was also the case made in the wonderful Poor Economics by Duflo and Banerjee. In randomized trials, they observed behavior that we would classify as irrational. For instance, when the poor in Maharashtra, India as well as in Philippines, were given a food subsidy, they chose to spend the extra income on sweets and other “luxury” food items, rather than more nutritious alternatives that would have been more beneficial in the long term. Similarly, they found poor, unemployed men in a village in Africa who had televisions at home, even though their primary concern “ought” to have been feeding the family. What we must understand is that in the context of sustained poverty, the long-term becomes irrelevant, and the rational decision is in fact a short-term focused one.

All of these narratives have some merit, and are probably at play to different extents. This is one of the things that makes development economics so difficult.


Notes or Blogging?

I’m sure you feel the need to put down your thoughts from time to time, aggregating facts and opinions you read/watch/learn and chronicling your changing perceptions to them. I can see two ways of doing this, either maintaining personal notes, or publishing them to some sharing platform (blogs, Facebook). I have tried note-taking with the likes of Evernote, Catch, Emacs Org mode etc. But I haven’t had much success with any of them. I’m wondering if blogging is a better option.

Maintaining notes allows you to constantly append/edit these thoughts, essentially treating the notes as scratchpads. It allows you to leave your thoughts in an unfinished state, without exposing them to public scrutiny till you’re done with them.

On the other hand, there is an element of finality to pushing the publish button. The extra effort it takes to dot the ‘i’s and cross the ‘t’s hones your thought process. There is also something to be said about maintaining a web presence in today’s economy. It also encourages feedback in the form of comments, allowing you to have a conversation around the topic. From the point of view of clarifying my thoughts to myself, the only thing better than writing them up is having a conversation with someone about them.

The social networks today (Facebook, Google+) are certainly biased towards brevity. They are full of short snippets of random thoughts, often with no original intellectual contribution from the author.

I just noticed that WordPress allows you to “publish” a blog with Private visibility. I guess that could be the best of both worlds, allowing a smooth transition from an incoherent personal note to a publicly visible post.

What would make it all right?

I’m greatly offended by the massive surveillance of our digital lives by the NSA, GCHQ and probably other intelligence agencies, as exposed by the Snowden leaks, all in the name of security. Who better to make the case against such power-grab than Obama himself, from 2007 (emphasis mine).

“This administration also puts forward a false choice between the liberties we cherish and the security we provide. I will provide our intelligence and law enforcement agencies with the tools they need to track and take out the terrorists without undermining our Constitution and our freedom. That means no more illegal wiretapping of American citizens. No more national security letters to spy on citizens who are not suspected of a crime. No more tracking citizens who do nothing more than protest a misguided war. No more ignoring the law when it is inconvenient. That is not who we are. And it is not what is necessary to defeat the terrorists. The FISA court works. The separation of powers works. Our Constitution works. We will again set an example for the world that the law is not subject to the whims of stubborn rulers, and that justice is not arbitrary.”

Let us also look at how he justified the surveillance in June this year, long before more widespread violations were exposed, including blanket surveillance of private communications of American citizens and foreign leaders (emphasis mine).

But I think it’s important for everybody to understand — and I think the American people understand — that there are some tradeoffs involved.  I came in with a healthy skepticism about these programs.  My team evaluated them.  We scrubbed them thoroughly.  We actually expanded some of the oversight, increased some of safeguards.  But my assessment and my team’s assessment was that they help us prevent terrorist attacks.  And the modest encroachments on the privacy that are involved in getting phone numbers or duration without a name attached and not looking at content, that on net, it was worth us doing.  Some other folks may have a different assessment on that.
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