Over at The New Republic, Jamie Holmes, a policy analyst at the goo-goo think tank, New America Foundation offers an interesting argument that willpower depletion is a cause of sustained poverty. In recent years, psychologists have conducted experiments in which they get subjects to make a trade-off, say between eating a cupcake or a carrot. Next, the researchers offer subjects another trade-off, and many give into temptation. It seems that exercising one's willpower depletes it. Holmes argues that the poor in developing countries have to make many more painful trade-offs than do the rich, so that their willpower is sapped all the time, leading them to make bad decisions that keep them in poverty. As Holmes reports:
….the core of the breakthrough is that resolving conflicts among choices is expensive at a cognitive level and can be unpleasant. It causes mental fatigue.
Nowhere is this revelation more important than in our efforts to understand poverty. Taking this model of willpower into the real world, psychologists and economists have been exploring one particular source of stress on the mind: finances. The level at which the poor have to exert financial self-control, they have suggested, is far lower than the level at which the well-off have to do so. Purchasing decisions that the wealthy can base entirely on preference, like buying dinner, require rigorous tradeoff calculations for the poor. As Princeton psychologist Eldar Shafir formulated the point in a recent talk, for the poor, "almost everything they do requires tradeoff thinking. It's distracting, it's depleting … and it leads to error." The poor have to make financial tradeoff decisions, as Shafir put it, "on anything above a muffin."
Anecdotal evidence from personal experience warning here. After I dropped out of law school during the 1970s Jimmy Carter recession (perhaps an example of failed willpower), I spent some time in food service. I knew that I should be saving some money, but instead I went out with my buddies nearly every night spending my tips on countless pitchers of beer. So to some extent, the willpower depletion research resonates with me. And let's not get into the reseach on procrastination.
So what are the policy implications for poverty alleviation? Holmes notes research finding that willpower can be bolstered by various "commitment products," e.g., ways for people to commit to procedures that automatically produce "good behavior," such as, automatic deposits from paychecks into savings accounts. So far, so good. But how does this research explain human history and the astonishing phenomena of economic growth in the first place? The plain fact is that the natural state of humanity has been abject poverty, until about two centuries ago.
Economic historian Deirdre McCloskey in an excellent lecture on the bourgeois virtues explained that she starts…
…every class I give on history or economics by showing an imagined chart extending from one side of the room to the other in which income per head bounces along at $1 a day for 80,000 to 50,000 years . . . and then in the last 200 years explodes, to the $109 a day the average American now earns. Your ancestors and mine were dirt-poor slaves, and ignorant. We should all make sure that people grasp that capitalism and freedom, not government "programs," have made us rich.
The bourgeois virtues are prudence, temperance, justice, and courage. Of course, many people exhibited these virtues over the millennia, so why did their practice result in the explosion of economic growth only in the past two centuries? Making a long story short, I suspect it's because the advent of the rule of law made various "commitment products" credible. I am thinking about critical commitment products, such as, secure private property rights and fairly enforced contracts, which in turn jumpstarted economic growth. Once economic growth takes off, the trade-offs that people have to make become less onerous and thus less likely to deplete their willpower, producing a virtuous circle of prudence leading to more investment leading to more growth, etc.
Holmes cites some marginal programs that have been shown to improve prudence among the poor in developing countries. That's great, but if one really wants to alleviate poverty on a massive scale, the way to go is to somehow establish the rule of law. Sadly, there is no top-down formula for doing that.
Some readers might be interested in my column, Poor Planning: How to achieve the miracle of poverty.