A new study, coming out of India and the United States, found that when people are in financial straits, their cognitive decision making abilities are limited. The group of researchers looked to Indian farmers as their participants, seen as ideal subjects due to their ever-changing financial situations. With their financial cycle bonded to their crop cycle, these farmers must endure bouts of waiting for their crops to provide for them.
The cycle consists of three stages: 1) when the farmers take out loans to grow their crops, 2) after the harvest when the crops are grown, but they haven’t sold yet, and 3) after being paid. Farmers face extreme poverty when they first take out loans, but this poverty is at its worst right before crops are sold.
Conducted by Dr. Anandi Mani, an economist of the University of Warwick in Coventry, England, the work measured the IQ of the same sugarcane farmers at the different financial stages of the year. “With the sugarcane farmers, we are comparing the same person when he has less money to when he has more money,” Dr. Mani said. “We’re finding that when he has more money he is more intelligent, as defined by IQ tests.”
This drop in intelligence impairs reasoning abilities as much as going a night without sleep, around 13 IQ points. Once they were able to sell harvested crops and return to sufficiency, the farmers scored much higher on the same mental test. The research team proposes improved score are partly derived from temporary freedom from financial stressors.
If this is true, this study tells us what many have expected, namely, that short term thinking is shot to the forefront of decision making in times of need, i.e., survival. To determine that this wasn’t solely an Indian phenomenon, similar IQ tests were taken in the United States. This time however, the farmer and his harvest market schedule were replaced with two groups of people, wealthy and poor.
Before the exam took place, individuals from both financial backgrounds answered hypothetical financial questions that ranged in difficulty. Once these questions had triggered the participant’s thoughts on finances, the exam takers faced nonverbal tests of logical reasoning along with computer images requiring rapid response answers.
The U.S. results displayed similar results as their Indian counterparts. Whereas poor individuals fared worse than wealthier in the harder mental tests after financial questions had been asked, both scored around the same during the easier mental tests. In conclusion, the mental ability of poverty facing individuals puts them at another disadvantage to climbing out of hardship.
– Michael Carney