Thursday, May 14, 2015

For a Smarter America

If you were asked to name different types of taxes, you would offer some types very quickly, such as sales, income, real estate, inheritance, and value-added. But you would probably not answer “bandwidth tax.” Unlike the other taxes, the bandwidth tax does not diminish one's bankroll. Rather, it's a tax that diminishes a person's ability to focus on several different areas of concern.

When faced with a condition of scarcity—of time, food, or money, for example—a person's bandwidth narrows to finding a solution to the immediate problem. Cara Feinberg, in an article in Harvard Magazine,* tells of a World War II experiment at the University of Minnesota in which the volunteers agreed to starve themselves. What caught the attention of Sendhil Mullainathan many decades later when he studied the report of the experiment was not the expected decline in the men's physical condition but how “scarcity had stolen more than flesh and muscle. It had captured the starving men’s minds.” One participant reported, “Food became the one central and only thing really in one’s life.”

Mullainathan is co-author with Eldar Shafir of Scarcity: Why Having Too Little Means So Much. As a result on their research, they argue, according to Feinberg, that “scarcity steals mental capacity wherever it occurs.” In one of the authors' experiments, “poor” and “rich” subjects (determined by their reported household income) were given an IQ test after being presented with a hypothetical problem that would require spending either $300 or $3,000 on auto repairs. The authors discovered that
when presented with the higher cost scenario, the poor people’s scores dropped the equivalent of about 14 IQ points: the difference between the categories of “superior” and “average” intelligence—or more pointedly, from “average” to “borderline deficient.”
But there was no significant change for the rich people.

Poverty, as Mullainathan puts it, “—no matter who you are—can make you dumber” (because the feeling of scarcity limits your bandwidth).**
Thinking about the outcome of Mullainathan and Shafir's study, I have discerned a way to raise the intelligence level of our country (and what patriotic American would not wish to do so?): Make the poor un-poor.

Now I know that some of you may have choked when you read the above sentence. After all, you probably will argue, the poor are poor because they make bad decisions—that their personal failure makes the poor morally deserving, therefore, of their poverty. However, Feinberg quotes Daniel Kahneman, Nobel Prize winner in Economics, who turns the statement around, claiming that “people make bad decisions because they are poor.”

Moreover, many people will argue that it's not in the American grain to give those who they perceive (wrongly, as it turns out) as responsible for their distressed state any handouts—even if designed to improve the lot of the miserable. However, while they may gag at alleviating the plight of those who are not poor because of personal failures, it is precisely in the American grain to give relief to those who are responsible for their failures. I'm talking about professional sports leagues, which every year grant the worst performing teams the choicest pickings of eligible newcomers. So much for suffering for one's personal incompetence!
So, in conclusion, I have identified in principle what should be done to make the country smarter; I leave it to others to figure out how in practice to bring the desired result about— by making the poor un-poor. Maybe the poor could band together and kick some balls around. Then the truly incompetent poor might be granted a boon. It's the American Way!

**In an interview in the Washington PostMullainathan uses the analogy of having to fight a fire to explain how people short on money get ensnared by payday loans. They have to focus their attention on meeting the needs of the here and now.