Your Brain on Poverty: Why Poor People Seem to Make Bad Decisions (2013) | Hacker News Reader

Your Brain on Poverty: Why Poor People Seem to Make Bad Decisions (2013)

theatlantic.com

146 pointsbane117 comments

There was a great study published in the journal Cognition a few years ago revisiting the famous kids & marshmallows self-control study, but where the researchers additionally manipulated the children's beliefs in the environmental variability. They offered the kids some desirable thing and then either gave it to them or not, then checked how much self-control they exercised on the marshmallow task. The idea here is that if the payoff is highly unreliable, the rational thing to do is to go ahead and eat the first marshmallow because 1) there's a pretty good chance there aren't more coming and 2) even the first marshmallow might disappear. I think there's a pretty clear socioeconomic analog of this— if you have few resources and an unreliable environment, it's rational to act on a much shorter timeline.

Wow first few top responses here reflect the upper-middle-class nerd myopia.

You don't understand what middle class is. Middle class is not a specific dollar figure. It's not owning a large TV. Middle class is when you don't have the set of anxieties that cloud your judgement and depress your day.

Middle class means you don't care if your paycheck gets delayed from Friday to Monday. Middle class is when you don't have to count how many times a week you go to the laundromat.

Sadly, middle class, as evidenced by these responses, also means that you don't see why other people would care if their paycheck gets delayed by a business day or two. It's no big deal, you are convinced. Yet, there's a woman that just started working, waiting for her first paycheck, which already had to be delayed due to starting date not aligning with payment schedules. And she has been planning to pay rent with this money, on the promised date. And yet, because some upper-middle-class manager with middle-class myopia forgot to submit everyone's timecards on time (as required by the similarly-myopic corporate policy), everyone's paychecks get delayed by a few days, including this woman's. Now she has to deal with missing paying rent. True story, in modern liberal bastion of Massachusetts.

All you have to do is understand why it's considerably more difficult for someone to improve their life, when starting from a much lower point, constantly being banged around by the ankles of the society.

I've seen many middle class employees run to their cars at lunchtime on payday, to get to the bank and deposit it before their checks bounced. It happened every payday.

I've seen employees run to the bank at lunchtime on payday, to deposit their paycheck before the paycheck bounced.

Those in a better financial situation could avoid the stress by jumping ship when trouble first arose (i.e. it wouldn't be jumping out of the pot and into the fire).

Sadly, middle class, as evidenced by these responses, also means that you don't see why other people would care if their paycheck gets delayed by a business day or two.

Please stop trying play mind reader. There is no evidence of that by these responses.

A good friend of mine would regularly burst into tears in the bank on payday because she knew her rent and car payment would be taken out first thing in the morning, but her pay wouldn't be in until end of business.

Other weeks she would get a panic attack and cry herself to sleep because she'd had to get a flat tire fixed for $20, and she knew it would all come crashing down at the end of the pay period and she'd be $20 short.

I'm not saying her poor choices didn't get her there, I'm just saying that for lots of people, $20 can run their life.

I never allow any company, for any reason, to use ACH on my bank accounts. When you do that, you lose control over your finances.

Do you mean auto-drafting of bills? In my experience, you can usually set it up to take the money it at the last possible moment. In that case, I don't see how you could get any benefit from doing it manually. Is there something I'm missing?

For folks right at the edge the decision may come down to "which is higher, the late fee or the overdraft fee?"

A few years back there was a case against one of the big banks over structuring transactions on the same day - the bank was doing them largest to smallest, with the end result that people were being hit with multiple overdraft fees in one day. If you had enough for 3 of 4 bills but would be $100 short on the largest, the bank would pay the big one, then the second largest, then either cover or bounce the last two while charging an overdraft fee for each. At the end of the day instead of being $100 short you were $200 sorry with extra fees.

^ exactly. I believe it's now illegal to do transactions in that manner, but there was a time when it was SOP.

Yes, auto-drafting of bills.

There are two major benefits.

- more control. You can choose to delay paying a specific bill to make sure more important bills get paid on time.

- safety. You'll never find yourself trying to get money back from a company that you're having a dispute with.

I used to allow it, and I ran into the second issue. It's the reason why I made that decision years ago, and I don't regret it one bit. It takes all of 1-2 hours/month to get all my bills paid.

The first point (control) is more for the post I was responding to, however.

When my mom was working, they didn't have direct deposit, so she had to pick up her paycheck from her mailbox in the school office. She always made sure to pick it up promptly, because leaving it there over the weekend made it look like she didn't "need" the money.

Yes, but it's also good to understand how some people in really poor places like Bangladesh or Malawi are able to overcome while others in the same class and circumstance aren't, for example. What, is it in those people which makes them overcome obstacles others can't or dont want to. What makes some people succumb to circumstance while others persevere in the face of it?

Number one factor LUCK.

There are many ways to get completely fucked over even if your wealthy. Money acts as an insulating factor, but if your lucky you don't need healthcare, or tutoring etc.

The thing is when you look at the bottom 2,000,000,000 people you end up with some real outliers. If they all got 1 megga million ticket per year then in a decade you end up with 77 winners. Sure, it's a terrible use of money, but you don't learn much from looking at outliers because your selecting for lucky people. Look at the luckiest 0.1% and you have 2 million people.

Luck explains some. But you see the woman who sells water at the bus depot, or the man selling loose cigarettes, etc. Some hustle and hire someone [other family] else to do the same thing, expanding little by little. They are not wealthy, but they can afford to send their kids to public school, whereas others can't "afford" [buy shoes, textbooks, etc] to send their kids to public schools. One invests in the next generation so they can get a government job (or perhaps private) while others will be be stuck in the poverty cycle.

Your Bangladesh example really proves that social circumstances matter more than individual qualities. A moderately intelligent and somewhat hard working middle class American who goes to a decent state college enjoys a standard of living that far outstrips that of all but the absolute richest Bangladeshis. Why? Is he just smarter and more hard working than the top Bangladeshi students who go to the top Bangladeshi colleges? Or is it because he faces totally different circumstances?

Circumstance is an important factor. As you illustrate, Americans (or middle class Nigerians, or Japanese, or Chilean) have a higher potential circumstantially, but despite that many "underachieve" with respect to what someone else could do with similar resources (education, infrastructure, healthcare, economic stability, etc.) in other places.

So, yes in many ways it's relative. But additionally persevering is better than succumbing to circumstance.

Middle class is more a way of thinking than income level. Due to some amazingly bad decision making by my parents my family was quite poor by the time I reached high school. While it was not easy, I was able to pull myself up into the upper middle class by hard work and delayed gratification. I was only able to do this because my thinking was middle class. My poor friends and acquaintances who did not have this way of thinking were not able to escape their poverty.

What you may be getting at is something similar to this: https://en.wikipedia.org/wiki/Culture_of_poverty

Which I don't completely disagree with. At certain cross-cutting cleavages, one can reasonably say that it is the people in a toxic environment who perpetuate the toxicity than most other influences (not combined)[1]

Two problems, however, with redefining social class to be based upon "thinking" is that it neglects causality of said thinking, and, worse, fabulates "just so" stories.

The first problem can be phrased as: are my poor friends bad at managing their socioeconomic lives because they don't have the same values or abilities as I, or is it because they're too exhausted by their daily drudgeries to invest the time and effort to climb the ladders of advancement? Do I have more natural talent and skills which align with market needs than my fellow? Perhaps a bit of both for the first question, and yes, probably, for the second.

The second problem with that perspective is that it essentially boils down to: "The poor think poorly therefore they are poor.", "The middle class thinks good therefore they are the middle class." and, of course, "the upper class think amazingly therefore they are upper class." One can argue that poor thinking will lead them to make unwise decisions that will sap their financial strength[2]. But not always: what goes on in the head doesn't necessarily always changes the number of zeros in a bank account. [3]

While I agree an individual ought not to be not foolish with their assets, other factors like environment must be included in analysis to know why some succeed and most flounder. Conflating class with intelligence, i.e. a way of thinking being the main criteria for class, is more or less an opinion page of the Wall Street Journal and not a good start for analyzing how to better social mobility.

[1] Pakistan is a good example of people perpetuating toxicity. Context: https://news.ycombinator.com/item?id=9642488 and direct link: https://www.quora.com/Does-the-average-Pakistani-support-the...

[2] In a rigged system, I would say that poor thinking by an upper class person could paradoxically help them ascend to even greater heights. For example: https://www.washingtonpost.com/news/on-leadership/wp/2014/03.... For a better and more topical example: http://www.politico.com/magazine/story/2015/09/donald-trump-...

[3] http://krugman.blogs.nytimes.com/2014/01/28/money-and-class/...

in re your [1]

http://www.bbc.com/news/magazine-28439518

http://www.dawn.com/news/1163596/why-blasphemy-remains-unpar... (whole series is good)

http://www.dawn.com/news/1151930/it-wasnt-the-final-atrocity

By thinking I don't mean intelligence, but the way of looking at the world. I could see even from a young age that by working hard and delaying gratification I could escape poverty which others in the same financial situation as me did not see. They had the same opportunities as me, but for whatever reason they were not able to utilise them. I saw poverty as something that could be escaped from, while others saw it as their lot.

> Middle class means you don't care if your paycheck gets delayed from Friday to Monday. Middle class is when you don't have to count how many times a week you go to the laundromat.

Middle class varies beyond recognition depending on which culture you're looking at --- I suspect you're overgeneralising your own. (Weekly paycheques? Laundromats which are cheaper than washing clothes yourself? Neither of those are things where I come from...)

His anecdote works with biweekly paychecks, and many city apartments in the US do not allow a washer and dryer.

Not all people live in the US.

And with monthly paychecks? (and monthly rent)

When you say "washing clothes yourself," do you mean with a laundry machine and dryer, or in the river? Certainly, it costs more to do laundry at a laundromat on a per-load basis, but having your own washer and dryer is a capital investment many people can't afford to make.

middle class is defined by income.

Someone who makes $15k/month and has $14.5k/month in expenses will be stressed out, but no one would claim they're poor, just foolish.

People can be overextended at any income level. And people who make minimum wage can be very careful with their money, live at home with their parents, pack their lunch, and have thousands in the bank.

Yes, there are outliers and exceptions to the rule at every level.

This is more than outliers. There are way more middle / high income people over-extended to call them outliers. Also, there are pretty much whole countries of people who we would consider to have "poor" incomes who manage their money prudently.

There are billions (BILLIONS) of people living in grave poverty in the developing world for whom "managing their money prudently" means not getting any shoes more than once a year or skipping diner.

The idea that any significant percentage of poor are poor because they are not prudent does not hold.

And even if it did, it's way easier to be "prudent" when you have a basic income that covers your needs and leaves a little or a lot more to be prudent with, than when you go hand to mouth with every paycheck.

> The idea that any significant percentage of poor are poor because they are not prudent does not hold.

It holds pretty well.

There is no contradiction in billions of people being not prudent.

It's easily achievable with poor culture dominating in the whole society.

>There is no contradiction in billions of people being not prudent.

That's in theory -- we're talking about reality. If you think poor people in India, Asia, Africa etc. are poor because they are not "prudent" or because "poor culture" dominates the whole society you probably haven't met many in real life -- hardworking, pinching pennies and raising families on a handful of dollars a month.

It's easy for people playing life in easy-mode to condemn the poor's "lack of prudence" from a first world middle/upper class existence, where prudence means not buying a new car every 3 years.

Being hardworking is not enough. You should also work in a right direction and in right environment. Right culture helps you choose right direction and right environment. Right culture also helps you to make right changes in your political environment.

For example, if your culture allows lies and corruption from elected politicians, you are likely to create suboptimal environment around you.

My friends in Russia make that silly choice - they support lying corrupt politicians in favor of pleasing their nationalistic feelings.

Guess what - they lowered their income ~2x just by that.

It is a function of culture. And experience. People who lived through the Depression or lived in another country where resources are hard to come by are more likely to be savers.

People who've been handed everything often don't prepare for the future.

People who understand the magic of compound interest are more likely to be savers.

People who've grown up with the government punishing savers, not so much. Perhaps they even think those who save are weird or outliers.

Being poor means you have no cushion. Particularly if you are poor in an urban/suburban area. You are one unfortunate event away from being wiped out.

Company downsizes or has a round of layoffs, and you lose your job? The rent, the car payment, the grocery bill, the utilities, etc, don't go away. Some of that you can scrape by on by shifting the bills onto credit, but most landlords don't take VISA.

Get in an accident, and get seriously injured? Now you can't work, and you've got either huge medical bills, or a deductible that you have to pay before the insurance covers the rest. Maybe you heal up and your job isn't there any more.

If you are poor in a rural area, you actually have more options than if you are living in a city. My grandparents were poor as church mice, but if things really hit the fan, at least they still had a roof over their heads (even if it's a dirt-floor shack), they had a plot of land they could grow a garden in, wood that could be chopped down to feed the wood stove, and deer that could be poached to put meat on the table. They had resources and skills that could help them subsist and ride out rough patches where money was tight or non-existent.

Spending everything as you get it, not being a saver, using all the credit lenders will allow - that means you have no cushion.

In the US, money is taken from you for Social Security and you can't get it back until you're 60. Or, rather, you get paid when later generations pay in.

In Singapore, there is forced savings. You still own everything you save. There's more freedom with how you invest it. And it's not dependent on future generations paying in.

You are correct about the rural area. There is less pressure, more ability to save. Its also more boring with fewer activities and people of interest, but you can save your pennies, invest in your ability to earn and perhaps move to where you can profit from those skills.

> Being poor means you have no cushion. Particularly if you are poor in an urban/suburban area. You are one unfortunate event away from being wiped out.

I think there is a more important distinction; really, one that is more valuable than any reasonable amount of saved money is. Family with the resources to support a person. I mean, most of the time, if you come from a middle-class family, you can't remain dependent forever, but you do have a place to stay while you get back on your feet, and you have a network of people who know people who can get you interviews for decent jobs.

I think this is a bigger advantage than it would seem at first glance; bankruptcy is dramatically less frightening if you know that worst-case, you can sleep at your parent's place, eat their food, and that they'll be calling all their contacts trying to get you an interview.

Here is the article itself: http://www2.warwick.ac.uk/fac/soc/economics/staff/amani/mani...

Note that the effects of financial concerns measured in this paper are large and instantaneous. There is nothing here about persistent, long-term effects.

A couple of observations:

- The proposed mechanism is that thinking about financial concerns ties up mental resources that would otherwise be available to solve tests. But it seems to follow that the poor do have their full mental resources available when dealing with those financial concerns themselves, so it does not seem to work as an explanation for poor decisions concerning finances.

- The sugar-cane farmers end up poor towards the end of the harvest cycle because they spend too much of their money soon after they have been paid (as the paper says, they "find it hard to smooth their consumption"). In other words, their eventual poverty is caused by poor decisions made when they are rich, not when they are poor.

The Logic of Stupid Poor People

http://tressiemc.com/2013/10/29/the-logic-of-stupid-poor-peo...

> I sat in on an interview for a new administrative assistant once. My regional vice president was doing the hiring. A long line of mostly black and brown women applied because we were a cosmetology school. Trade schools at the margins of skilled labor in a gendered field are necessarily classed and raced. I found one candidate particularly charming. She was trying to get out of a salon because 10 hours on her feet cutting hair would average out to an hourly rate below minimum wage. A desk job with 40 set hours and medical benefits represented mobility for her. When she left my VP turned to me and said, “did you see that tank top she had on under her blouse?! OMG, you wear a silk shell, not a tank top!” Both of the women were black.

> The VP had constructed her job as senior management. She drove a brand new BMW because she, “should treat herself” and liked to tell us that ours was an image business. A girl wearing a cotton tank top as a shell was incompatible with BMW-driving VPs in the image business. Gatekeeping is a complex job of managing boundaries that do not just define others but that also define ourselves. Status symbols — silk shells, designer shoes, luxury handbags — become keys to unlock these gates. If I need a job that will save my lower back and move my baby from medicaid to an HMO, how much should I spend signaling to people like my former VP that I will not compromise her status by opening the door to me? That candidate maybe could not afford a proper shell. I will never know. But I do know that had she gone hungry for two days to pay for it or missed wages for a trip to the store to buy it, she may have been rewarded a job that could have lifted her above minimum wage. Shells aren’t designer handbags, perhaps. But a cosmetology school in a strip mall isn’t a job at Bank of America, either.

> At the heart of these incredulous statements about the poor decisions poor people make is a belief that we would never be like them.

I grew up very poor, this did not make me stupid and implying such is offensive. There are poor people who can work it out and there are those who simply are incapable.

Knowing people that are still poor, including much of my own family, it is very obvious that they're unwilling to apply themselves. They give in to the easy quick fix, even when actively told not to and shown a better path. They are largely beyond help.

The people I know will make just as bad of decisions if given money. They are poor because they don't think about the future, they don't not think about the future because they're poor.

Dr. Mike Gazzaniga has done some excellent research on free will (or the lack thereof). It's impossible to break from the path on which you are headed, however you are responsible. Something happened to you that set you on a better path than that of the poor folks with the lack of forward thinking abilities that you mention.

That is a common view, but I don't think it's correct, and I don't think it's supported by the science.

I also grew up poor, but having been in tech for decades, being well off is a shit-ton easier. When thing go wrong, I have a cushion that I didn't before. That gives me time to think, time to recover from trauma, time and patience to consider and plan. I would love to attribute my new circumstances to my enormous virtue. But honestly, I think it's more about having lucked into a career that happens to be a great match and also be highly rewarded.

For those interested in the science how scarcity shapes cognition, this is a good book: http://scholar.harvard.edu/sendhil/scarcity

For those unfamiliar with the experience of poverty, John Scalzi's piece "Being Poor" is evocative:

http://whatever.scalzi.com/2005/09/03/being-poor/

And unlike most sites, that one definitely benefits from reading the comments.

"Being poor is knowing exactly how much everything costs."

There was a time when I could say exactly how much breakfast ingredients were per serving: oatmeal serving $0.xx; 2 eggs $0.20 (obviously not this year), 2 sausages $0.20 (frozen, buy when on sale for $1/box). I wasn't really constrained by those prices, but I was certainly sensitive enough with irregular customer payments to be well aware of them.

Scientific studies are not about you and your personal experiences. They are not about any one person. They are about trying to understand trends, general phenomena, and how humans tend to act under a variety of circumstances. You're an outlier, great. We get that you resent everyone who hasn't managed to pull themselves out of poverty but that's not what this article is about.

How does this compare with the 1800s, where tens of millions of people who arrived with nothing but a suitcase managed to move up into the middle class?

You may want to do more than zero research into how the middle class was created before joining this discussion.

Hint: start with WW2

If you did more that 1 second of research, you'd know the history of the middle class in the US starts in the early 1800s with the growth of manufacturing, not WWII. WWII was a huge boost for various reasons (women in the workforce, GI Bill), but it doesn't negate the parents point about the immigrants of the previous century.

Start a bit earlier: with FDR and The New Deal.

The persistence of this myth is truly remarkable. Consider that Veblen published "The Theory of the Leisure Class" in 1899. What we consider today the middle class was very much alive and booming by the end of the 19th century.

Is it alive and booming today?

We did also get some hundreds of thousands of immigrants (boat people) in the 1980s, I think mostly without suitcases. My impression (casual) is they have done fairly well.

> I grew up very poor, this did not make me stupid and implying such is offensive.

There's always outliers. You may be one. The point isn't that poor people are stupid, but that because of circumstance, they have 'overhead' which prevents them from being able to make the optimal decision.

Agreed. I'm sure there are also some examples out there of people who, despite insurmountable privilege, managed to make all of the wrong decisions and end up on the streets.

It is possible that though you grew up poor, you still had advantages that allowed you to rise out of it that the vast majority of those in poverty did not?

A mother who cared about your education and read to you?

A teacher in high school who took you under their wing?

A strong computer science program in you high school?

A strong interest in computing among your friends, which transitioned over to you?

>I grew up very poor, this did not make me stupid and implying such is offensive.

It's not that being poor makes you stupid, it's that when you are poor you tend to more carefully consider the consequences of decisions involving finances out of habit, which takes time and effort. That's time and effort your brain could be spending doing other things.

It says nothing about innate ability, only that using more resources for one task leaves less for other tasks. You could be a certified genius and this would still apply to you.

How much the effect has on overall success is a completely different discussion and has no bearing on whether or not the effect exists in the first place.

>it is very obvious that they're unwilling to apply themselves.

>They give in to the easy quick fix, even when actively told not to and shown a better path.

Would you be willing to consider alternate explanations why these things appear to be the way they are?

>The people I know will make just as bad of decisions if given money.

What if making good use of lots of money is a skill? A skill that takes learning to do well? What if certain patterns that affect a poor person result in the creation of habits that are really bad when you have lots of money? If either or both of those are even partly true, it makes a lot more sense why poor people have difficulty when given lots of money without being forced to ascribe it to their inherent goodness of character.

>They are poor because they don't think about the future, they don't not think about the future because they're poor.

Why must this be the only explanation? Is it really fair to generalize your own experiences with a handful of people over the millions of people dealing with poverty?

> Why must this be the only explanation?

That was the reasoning the article gave as well, the only difference is the article tried to explain why that is.

Being poor doesn't make you stupid any more than a runaway process makes a computer slow.

But being poor consumes mental energy and time, approximately equivalent to a decrease of 13 IQ points[0], just as a runaway process will make the affected computer slower (regardless of how fast it would otherwise be).

[0] http://motherboard.vice.com/blog/growing-up-poor-is-bad-for-...

I think it's natural for people who have never been given the benefit of the doubt to feel no responsibility to society for changing their ways. Someone has to be the bigger man / woman in order to break the cycle.

EDIT: And keep in mind, this attitude is not just learned from experience. If enough generations have experienced these hardships I imagine it can become a culture that perpetuates itself among entire families. It's hard to argue they're wrong when you're brought up in it and have never experienced anything different.

This is spot on. And if you think about it neurologically, changing patterns of thinking that have grown into your brain make it even harder, like breaking a facebook habit.

It's a process of learned helplessness: http://braythwayt.com/2015/01/20/learned-helplessness.html

The cognitive portion is only half the picture though, and I think wealthy people(especially moderately wealthy people) suffer from something similar(e.g. doctor just trying to get through the day rather than save lives and cure diseases.)

The other half is the social mechanisms that make poverty endemic. Going right to the root: it's the monetary system itself.

> Going right to the root: it's the monetary system itself.

Please pardon me for being pedantic, but there is distinction worthwhile, here.

The monetary system is a mechanism of liquid exchange for goods and services. It is largely good for everyone because it facilitates trade of otherwise incomparable goods, as well as possession of assets that can in the future be exchanged (i.e. savings). One cannot trade apples for oil tankers directly.

There are a few places that are considered the root of inequality, though. In my opinion, these include the tax system. A "progressive" tax leads to greater equality; optimally this will not diminish individual incentives, but one does not want to apply regressive (and often hidden) taxes that create systemic perpetual and inescapable poverty.

Second, the social commons. School, health care, policing, roads, etc., that give everyone opportunity to apply themselves to success. These are the things that lead to "social mobility". With poor social mobility, the poor stay poor and the rich stay rich, regardless of their competences.

It is an oversimplification and arguably inaccurate to say that the monetary system makes poverty endemic. I believe the root of the problem is founded in the two points above: the fairness of how we collect taxes; and, how opportunities for advancement come about – be they smarts and hard work and social institutions that recognize and reward those, or just being born with rich parents.

I think he doesn't mean money itself but the monopoly of money definition and creation by a small set of people (state or central bank).

> I think he doesn't mean money itself but the monopoly of money definition and creation by a small set of people (state or central bank).

He's not wrong in thinking that in practice people who are close to the money supply do better than those who are not, in the USA. That is not necessarily true, elsewhere. The real questions are, IMHO: 1. should proximity to the money supply be a (the) basis for social mobility? and 2. are the requirements of getting close to the money supply fair?

The supply of money is a separate issue from the fairness of distribution; central banks are not inherently unfair or a cause of inequality – they can in fact contribute to reduction of inequality by employing monetary policies that reduce the cost of borrowing (and simultaneously reducing the returns of lenders), which favours workers over savers.

Wait, can't a worker also be a saver? That seems like a false dichotomy to me, and what you're really suggesting is that monetary policy should encourage the accumulation of debt(spending) rather than careful insulation from chance(saving).

> That seems like a false dichotomy to me, and what you're really suggesting is that monetary policy should encourage the accumulation of debt(spending) rather than careful insulation from chance(saving).

I do not believe my statements suggest monetary policy should encourage anything. At least they were not meant to.

Lowering interest rates is bad for those with savings, but good for those with ongoing income. I understand this is a widely accepted observable economic phenomenon.

Does that clarify?

The monetary system is more than that. It's a monopolistic mechanism of social control founded on debt(an asymetric social relationship) and which can only be sustained by debt(more asymetry).

Starting out, the list of who has what wealth, defined in terms of our arbitrary monetary system, places some on the bottom and some on top then applies a massive downward force on those on the bottom.

I recommend Paul Grignon's Money as Debt: https://www.youtube.com/playlist?list=PLdMxiaZGboJSgU2raUksC...

There is also the fact that the monetary system is not a zero sum game for its users. Hence the perpetual indebtedness to central banks as we see with all major nations.

Professor Franz Hörmann of the Vienna University of Economics explains this design in his Banned Ted Talk:

https://m.youtube.com/watch?v=FYWVbdSX7B4

TLDW: When central banks create money and loan it out to nation states they charge an interest rate on top of the principal. However, the principal was the only money created, so the money which is contracted to be paid as interest physically does not exist. This systemic flaw is, Hörmann suggests, what creates poverty

To put it in even simpler ELI5 terms: it would be like going up to a 5 year old and saying, I've got these 10 widgets that only I can make and that you rely upon to survive. I'll let you borrow them if you agree to give me 11 of these widgets back when you're done, or else!

The idea of handing out cash has become popular lately but I'm skeptical.

Does anyone have an argument why handing them cash would be better than paying for needs?

It seems to me (less restrictive) housing subsidies, food stamps for everyone and child healthcare would help the poor a lot more than cash.

My argument is that paying basic needs will reduce stress level and help them deal with the problems. Not only does it make more intuitive sense, but when I've helped troubled family members, this has worked much better in practice than giving cash.

The article, which seems to support giving out cash, admits they don't make good decisions. A more generous assumption is that they spend it on their needs but spend all their will power doing so, leaving less willpower to address other problems.

Note: I'm in favor of helping the poor and I'm not bashing them. I think the stress of poverty partly causes them to make bad decisions and I think people have value even if they make bad decisions.

Also note: Please don't just downvote me if my argument isn't consistent with your ideology. That's lame (100% chance I get downvotes anyway). Rather, provide an argument if you disagree.

From what I understand the primary reason people seem to think giving money instead of services is better is due to overhead. If you need to monitor how the money is distributed and how the money is spent, then that requires entire branches of government to make this possible. Instead if you're just giving money you are giving those in need more, which more than likely will help them considerably more than if you're paying a ton of overhead in salaries and buildings and bureaucracy just so you can distribute money to those in need.

I think the appeal of basic income to HN crowd is that is a solution that an engineer would like. Very neat.

Some people can't manage their money though, however complicated that is.

Yeah, I would guess that the huge overhead is still more efficient given how poorly some would use the money, but that's just a hunch. I have nothing to back that up (and would love any argument on either side of that)

Here's a link to an article that summarizes one of the more interesting stories.

http://www.nationofchange.org/utah-ending-homelessness-givin...

About 1/2 way through it says:

"In 2005, Utah figured out that the annual cost of E.R. visits and jail stays for homeless people was about $16,670 per person, compared to $11,000 to provide each homeless person with an apartment and a social worker."

Another reason, I think, is a general belief that human nature is mostly good and if given a chance most people will do what's right with the money.

There would be problems sure, but I would say use that money (that would've been spent at the front of the pipeline) and find the problems in an audit process at the backend of the pipeline. Don't withhold money because people are irresponsible. Use part of the funds to audit, and then also to "recuperate / rehabilitate" those who have problems. I can't say for certain, but I've read many stories that lead me to believe that it's more expensive for a state to withhold basic things like food and shelter than it is to simply give it to them.

When all is said and done, those who turn out to be problems and never figure out how to turn their lives around, even after given every chance to fix their lives and become productive members of society, simply end up dying knowing they lived an unproductive life. I think in the modern world that will turn out to be enough of a penalty / incentive.

EDIT: I think we can all agree those who turn out to be problems, even with Basic or Minimum Guaranteed Income, will show up on the radar. Won't be hard. They'll be in prison, regularly in hospital overdosed on drugs, etc. So I doubt the backend audit would be more than a fraction of putting that cost at the front.

Awesome, a real counter argument. I can't believe that worked. Hacker news rocks.

Edit: Seriously I'm shocked. I wrote in hopes of getting a good response and figured this was the best chance, but the political environment lately is so polarized I expected the worst in any comment section anywhere.

It's simple maths. Wherever you live, there's a baseline amount of money that it costs to survive. Food costs the same whether you're rich or poor. Housing varies, but there is generally a baseline. If the baseline cost of living is $2000/month, and you make $2000 a month, you have $0 disposable income. If you make $4000 a month, you have $2000 in disposable income. If you make $8000 a month, you have $6000 per month disposable income, or 3 times that of the second scenario. Since the cost of certain things is constant, as you make more money, your disposable income rises dramatically (until a certain point where gains are seemingly only incremental, at which point you're no longer middle class).

The rich have more opportunity to save, thus they learn about saving. They have capital, thus learn how to use it. If you never save and never accrue capital, you'll never understand it. So any time you do end up with a windfall, you will inevitably squander it, since you've never had the experience of what to do with it.

Plus, money problems lead to stress. My wife grew up poor, and even though we're not doing badly today, it causes an immense amount of stress and is 'mental overhead' for her. She never wants to invest, is apprehensive about going to school herself, or basically doing anything that would deplete any amount of savings. This inevitably prevents her from attaining a 'higher' equilibrium, but I do understand the feeling (and for the record, based on where she came from, she's actually doing fantastic and has experience doing things that none of her relatives even contemplate doing). I grew up working class for this country (so probably the bottom end of 'middle class'), but I'm stubborn with a bit of a gambling streak. So I'm going to university, investing money, occasionally hustling for extra here and there (gambling, side jobs, etc...), and it's mostly going OK.

Plenty of relationships end over money. And when your world is falling all around you, it's all too easy to turn to 'escapes' such as drugs and alcohol.

This is a tech forum, so a little analogy. A poor person is like a phone whose specs are just barely enough to run Android. The experience is poor, laggy, and you can't play too many games, or do any 'productive' tasks. Middle class is like an iPad pro or a decent laptop, you can do what you want for the most part, it's a pleasant experience, but there are certain limitations. Being rich is like having a super-computer - the potential is seemingly limitless, you can solve problems that are out of reach of the first two.

Right now I'm in University, and being working-class, it's hard to compete with rich kids who live on their parents dollar. Every day I work is less time to study. Every time I have to cook dinner is less time to study. And if I need to study a 'minimum' amount to pass my courses, then I need to either sacrifice sleep or time with my wife. And neither leads to a particularly great outcome. So mostly I just suck it up and lose sleep, live off coffee, and am a solid 'B' student rather than actually competing with the more privileged kids. In the job market I'll probably have to use my life experience and hustling streak, since I won't compete on GPA or extra-curriculars.

Anyhow, just a few thoughts on the matter. And these sorts of problems with income inequality are why more and more economists support the idea of a basic income. It'll allow the 'poor' to have the ability to have disposable income with which they can get an education, or invest in themselves rather than work like dogs to barely survive. While this may not seem fair for those who have already attained middle class or higher (who always claim they 'earned' it, never mind the societal advantages they used), it's better for society. Unless you think having a serf class is a societal advantage (and there are people who think this)...

As someone with input into hiring decisions, I don't remember the last time I actually registered someone's GPA off a resume. Your background on the other hand would give you a huge leg up in our org (and I imagine others like it too).

We like to think hard work and correct attitudes towards education, savings and investment results in being well off. And to a certain extent it does.

But, many people who are well off, in fact likely some of the most well off, have an entirely different attitude that doesn't have anything to do with the above traits of the middle class. And that is the burning desire to fuck other people over and to take unfair advantage of others at every opportunity regardless of the effects it may have on the victims.

Poverty sometimes isn't all about short term thinking and bad choices. Sometimes it's just being fucked over at different scales again and again and not being able to defend oneself against it. Education and going to work everyday doesn't necessarily help in this regard.

http://playspent.org/

It's a Leftist recruitment article to get people feeling sorry for the poor who, SUPPOSEDLY, according to this article -- unlike most other humans, the poor are incapable of making good decisions, only bad ones.

I was living on the street as a teenager after making bad decisions and having my parents abandon me.

How did I start making good decisions (finally) ?

I quickly grew to HATE being poor.

That hatred of poverty helped me ask "okay, how do I get out of this, living on the street and having no prospects?"

I had independent means within 20 years (in my 30s) after that hatred of my poverty forced me to put more effort into what I did every day.

I was still making some bad decisions for a few years but over time I became very practiced at knowing what to choose (go to college? go in the military? get away from all my current acquaintances?)

Within a year of my peak of hating poverty I stumbled on the idea of having goals. I read "Your Erroneous Zones" by Wayne Dyer.

20 years later I had independent means (no boss, good income).

HATRED OF POVERTY. People who stay poor lack that.

THEIR RESPONSIBILITY. No one else's.

That article is a recruitment tool for Leftists, as in "we should feel sorry for the poor, it's not their fault."

Life will hold you individually responsible for YOUR DECISIONS.

So will the criminal justice system.

Articles like this one try to convince us that some people should NOT be held responsible for their behavior.

WRONG. WRONG. WRONG.

What was your IQ before you were out o the streets? Average grades? Were you exposed to hallucinogens such as DMT or LSD?

The outcome in your life largely depends on the opportunities available to you, whether it is perceived as you creating those or not.

Hating the experience of poverty is surely a fine thing. Hating other people for being poor, though, is sad. And rejecting empathy for those suffering because you might have to change your political views borders on obscene.

He didn't say that he hated other people for being poor. He said he "hated being poor'.

You'll note that I explicitly acknowledge that he hated being poor, and I do it in my first sentence. It's true that he didn't explicitly say that he hated poor people. But given what he wrote, how would you characterize his feelings toward the people who are still poor?

I realize that having initiative is important, but you're implying a level of determinacy in life that doesn't exist.

I see the consequences of my decisions, large and small, good and bad, every day. I made those decisions, and so the consequences are to my credit and my fault.

I don't subscribe to the fatalistic point of view that my path in life is predetermined. Not for a minute.

I'm not advocating determinism in the slightest. I'm saying that the GP is pretending as if exogenous factors and entities are ineffective.

You're still quite obviously making plenty of bad decisions.

Strive to move up; but help those behind you.

You're still quite obviously making plenty of bad decisions.

Or he's making great decisions. Because your rational is just based on your own political ideology.

He's using all caps in an online comment... Is that an ideological thing?

Actually, you have no idea what my rationale is. If you are curious, you should ask.

> I was living on the street as a teenager after making bad decisions and having my parents abandon me.

This doesn't sound like you spent your childhood poor with immediate family who've spent your life in poverty. Your comment is not constructive, sorry

https://hn.algolia.com/?query=Why%20Poor.%20People%20make%20...

People with weak character, poor morals and low IQ will probably be in poverty. I can't tell if the study takes this into consideration.

I can't tell if this is sarcastic or not, but there are plenty of politicians in this world that are not impoverished.

Can you define weak character and poor morals? Can you explain to us how these things will lead to poverty?

Who wants to do business with someone with poor morals. How can you trust them to keep their word.

Someone with weak character will lack the discipline necessary to get better at something or seize opportunities as they come up.

Spending your money on drugs and/or alcohol that you are addicted to.

Buying nice things you can't afford on expensive credit.

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