Elaboration on Hunger-Based Poverty Traps

In my previous post on hunger-based poverty traps I asked why individuals stuck in a poverty trap would not spend all of their disposable income on food in order to escape the trap. I attributed this to personal preference for certain goods such as tobacco.  However Harvard economist  Sendil Mullainathan and Princeton psychologist  Eldar Sharfir ran several experiments testing the decisions that individuals make when they are presented with the problem of scarcity that shed some light on this phenomenon.

The researchers modeled their experiment on the old game show Family Feud. Instead of using individuals that did not have much money, they used those that did not have enough time when answering the questions. When the researchers then presented those scarce on time the opportunity to borrow time from future rounds (they would receive one second now and surrender two seconds in the subsequent round) the subjects overall scores dropped significantly.

 In the experiment the subjects were so worried about how little time they had left that they made poor decisions regarding their time management. Now we apply this to the hunger-based poverty trap. Poor individuals are so concerned about how much food or money they have left that they make poor decisions regarding their precious resources. This is a brilliant insight into why individuals make the decisions they do when faced with scarcity.