Being short on cash may make you a bit slower in the brain, a new study suggests.
People worrying about having enough money to pay their bills tend to lose temporarily the equivalent of 13 IQ points, scientists found when they gave intelligence tests to shoppers at a New Jersey mall and farmers in India. The idea is that financial stress monopolizes thinking, making other calculations slower and more difficult, sort of like the effects of going without sleep for a night.
And this money-and-brain crunch applies, albeit to a smaller degree, to about 100 million Americans who face financial squeezes, say the team of economists and psychologists who wrote the study published in a recent issue of the journal Science.
“When we think about people who are financially stressed, we think they are short on money, but the truth is they are also short on cognitive capacity,” says Sendhil Mullainathan, a Harvard economist and study co-author.
The scientists looked at the effects of finances on the brain both in the lab and in the field. In controlled lab-like conditions, they had about 400 shoppers at Quaker Bridge Mall in central New Jersey consider certain financial scenarios and tested their brain power. Then they looked at real life in the fields of India, where farmers get paid only once a year. Before the harvest, they take out loans and pawn goods. After they sell their harvest, they are flush with cash.
Mullainathan and colleagues tested the same 464 farmers before and after the harvest and their IQ scores improved by 25% when their wallets fattened.
Poverty researcher Kathryn Edin of Harvard, who wasn't part of the study, says the research “is a big deal that solves a critical puzzle in poverty research.”
She says poor people often have the same mainstream values about marriage and two-parent families as everyone else, but they don't seem to act that way. This shows that it's not their values but the situation that impairs their decisionmaking, she says.
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