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August 30, 2013

Poverty can impair ability to think

(Continued)

"While the poor may be experiencing a scarcity of money, at some level what they may really be experiencing is a scarcity of bandwidth, of cognitive capacity," he said. "It's the situation that's creating the stress."

Zhao and Mullainathan said that their findings, if accurate, could have profound implications for public policy.

For starters, policymakers "should beware of imposing cognitive taxes on the poor just as they avoid monetary taxes on the poor," the paper states. Filling out long forms, deciphering complicated rules or undergoing lengthy interviews can consume scarce cognitive resources.

"You are captured by these monetary issues — how to pay rent, how to pay bills," Zhao said. "As a result, you're less attentive to other problems. You neglect other things in life that deserve your attention."

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