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Poverty is a major societal concern, not just in developing countries but right here in the United States. As a result, poverty and individuals who live in poverty are of interest to researchers. The more that is known about low-income families, the more that can be done to help improve their situation. A recent study by researchers from the University of Chicago Booth School of Business, Harvard University and Princeton University focused on how being poor can affect the decision-making process.

 

The research team worked on the hypothesis that being poor caused individuals to focus on immediate problems instead of the most pressing problems. For example, trips to the grocery store when money is tight are seen as an urgent problem. Obviously, putting food on the table is a concern, but this almost all-encompassing focus on the immediate prevents problem solving and planning for future events, like paying the rent a few weeks down the road.

 

The hypothesis was tested through a series of five different experiments. Each experiment was a different game that provided some players more money or borrowing opportunities than other players. Players were randomly assigned budgets and the “poor” players borrowed more, even when they were the most engaged in the experiment.

 

Conclusions from the study include:

 

Ultimately the researchers concluded that programs that focus on meeting specific future financial needs and what steps should be taken to save for these needs will help improve the lives of low-income individuals.

 

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