Sympathy, empathy and scarce attention

Last night I attended a fascinating lecture by Sendil Mullainathan on his book with Eldar Shafir, [amazon_link id=”0141049197″ target=”_blank” ]Scarcity: The True Cost of Not Having Enough[/amazon_link]. I haven’t read it yet but will certainly do so now.

[amazon_image id=”0141049197″ link=”true” target=”_blank” size=”medium” ]Scarcity: The True Cost of Not Having Enough[/amazon_image]

The book has been widely reviewed so the main argument is probably well known: people who do not have enough money have their attention focused on immediate problems, to the detriment of thinking about the consequences of short-term actions. The future in general is outside the tunnel of what they have the capacity to pay attention to. “Cognitive bandwidth is a fixed resource.” A lot gets used up by attending to urgent, day-to-day financial problems and needs – about which, slightly paradoxically, the people in this situation are ultra-rational, and very focused on the most cost-efficient decision.

The scale of the effect of this attentional tunneling on the quality of other decisions is large – almost as big as not having slept at all at night. All the time. And the decisions adversely affected cover all aspects of life, not just financial choices like whether or not to take out that pay day loan: how to parent, whether to keep up a course of medicine, and so on.

There are other kinds of scarcity that create the same kind of tunnel vision – including time scarcity. Prof Mullainathan drew this analogy, saying he’d tried it on hedge fund managers to see if it helped them understand the psychology of poverty. Someone with no money opting for a payday loan is like someone with no time not having time to do a piece of paperwork and ending up spending more time sorting out the resulting hassle. However, he added: “Different forms of scarcity have different optionality. Poverty is relentless. I can’t decide to change my poverty-life balance.”

The next question of course is what conclusions to draw from the insight about scarcity (of money) gobbling up people’s cognitive bandwidth. One conclusion is that expecting people on low incomes to fill out long forms to get benefits – or do anything – is a regressive attentional tax. Just as the cockpit of a plane is designed and engineered to be as fault-tolerant as possible, we should do the same with any engagement between people and government (or businesses, or school…..). Another that occurs to me is whether it’s possible to design some simple financial planning aids or reminders.

Interestingly, Prof Mullainathan said: “People who care about poverty tend to feel sympathy. But sympathy is a distancing emotion. We need to feel empathy.” It reminded me of Julia Unwin’s excellent book [amazon_link id=”B00SLWGUH6″ target=”_blank” ]Why Fight Poverty?[/amazon_link], which is exactly about the emotional reaction we have to poverty and why that actually makes it harder for well-meaning policy people to do anything about it.

[amazon_image id=”B00I124BLS” link=”true” target=”_blank” size=”medium” ]Why Fight Poverty? (Perspectives)[/amazon_image]

 

Well-being and development

Yesterday I attended the London launch of the annual UNDP Human Development Report – the title this year is [amazon_link id=”9211263689″ target=”_blank” ]Sustaining Human Progress: Reducing vulnerabilities and building resilience[/amazon_link]. The report notes the combination of advances in human development over the years – for most people in most countries – with a strong sense of precariousness in many places. This is not only because of economic uncertainty but also the risk of natural disasters, violence, corruption, ill health, industrial accidents. Poverty leaves people ill-equipped to respond to any of these shocks, and some groups such as the very old or young, or women or minorities, are particularly vulnerable.

One of the panellists was Richard Layard, talking about his new co-authored book [amazon_link id=”1846146054″ target=”_blank” ]Thrive[/amazon_link], which emphasises mental health as an over-looked but vital issue for people’s well-being. In his comments he said mental ill-health was responsible for more misery than unemployment or poverty in the rich countries, and possibly in poor countries too (although I think they are correlated). He described [amazon_link id=”1614271747″ target=”_blank” ]Maslow’s hierarchy of needs[/amazon_link] as “an appalling concept”: a sense of meaning in life is more fundamental than material needs, according to Lord Layard.

He went on to claim that recent well-being research in China shows that the least happy people are those who move from countryside to town, and seemed to be saying this should call into question China’s emphasis on economic growth. While China has certainly paid a high environmental price for industrial growth, and is characterised by great inequality and authoritarian politics, I would certainly challenge the Layard argument at this point. As Khalid Malik, the Director of the HDR pointed out, those discontents who move from countryside to town, to those grim-seeming jobs in factories, don’t want to return to the village.

What’s more, traditional rural societies usually have a gender hierarchy that makes towns far more attractive for women. This point emerged in the recent thoughtful BBC2 programme on garment manufacture in Bangladesh, Clothes to DIe For. Despite the Rana Plaza tragedy, young women still wanted factory jobs.

So why the higher self-reported dissatisfaction by Chinese urban migrants? I don’t know whether the research was able to rule out causality issues like whether the individuals were more dissatisfied and restless to start with, or whether there is something subtle going on with their answers to survey questions.

Of course one of the key attractions of the HDR is that the Human Development Index is exactly a measure that reduces the focus on GDP in favour of an indicator based on [amazon_link id=”0192893300″ target=”_blank” ]Amartya Sen’s concept of ‘capabilities'[/amazon_link], the resources and attributes needed to live a fulfilling life. The top five countries this year are Norway, Australia, Switzerland, Netherlands and the US. If you adjust for income inequality, the US slips 23 places and Germany becomes number 5. The expected quintet of sub-Saharan African countries (Niger, DRC, CAR, Chad and Sierra Leone) are ranked bottom. (Somalia, South Sudan and North Korea would be down there if there were data available.)

Not bowling alone

The UK economy is growing at a decent clip now, but the consequences of the long downturn linger on. The distinguishing feature of the post-2008 economic landscape in most western economies is how long growth has been so weak, how long it has taken for GDP to regain its previous peak. The final chapter of [amazon_link id=”0300203772″ target=”_blank” ]Hard Times: The Divisive Toll of the Economic Slump[/amazon_link] by Tom Clark with Anthony Heath describes the book’s suggestions for tackling the consequences of lengthy economic weakness as “wearyingly familiar.” That doesn’t make it any the less important to be reminded by this book of the social impact of the seven lean years since the Great Financial Crisis. Too often, discussions about the economic issues and the social issues proceed separately, but they are tightly linked.

[amazon_image id=”0300203772″ link=”true” target=”_blank” size=”medium” ]Hard Times: The Divisive Toll of the Economic Slump[/amazon_image]

The book is the product of a five-year research programme conducted by the University of Manchester (my new home as Professor of Economics from 1 September) and Harvard University, directed by Robert Putnam, famously author of [amazon_link id=”0743203046″ target=”_blank” ]Bowling Alone[/amazon_link] and its fascinating precursor [amazon_link id=”0691037388″ target=”_blank” ]Making Democracy Work: Civic Traditions in Modern Italy.[/amazon_link] The presentation of those depressingly familiar economic statistics is accompanied by interviews with a range of people affected by unemployment, or precarious employment, or benefit cuts since 2008. It humanizes the – well, “wearyingly familiar” –  statistics and charts.

The human stuff – the social capital – really matters. [amazon_link id=”0300203772″ target=”_blank” ]Hard Times[/amazon_link] begins by citing a classic (1933) sociological study of the effects of mass unemployment, [amazon_link id=”0765809443″ target=”_blank” ]Marienthal: the sociography of an unemployed community[/amazon_link]. In this small Austrian town whose mill closed, people were asked to keep diaries, which recorded the loss of energy and social activity. Unemployment brought lethargy and isolation. The alternative in other places during the 1930s was rage.

[amazon_image id=”0765809443″ link=”true” target=”_blank” size=”medium” ]Marienthal (Ppr): The Sociography of an Unemployed Community[/amazon_image]

Other sociologists have demonstrated the importance of social ties in other contexts. One of my all-time favourites is Eric Klinenberg’s [amazon_link id=”0226443221″ target=”_blank” ]Heatwave[/amazon_link], which documents the clear impact of different family structures on ‘excess’ death rates during a Chicago heatwave: Hispanic families and neighbourhoods, more cohesive than equally poor African-American neighbourhoods, saw fewer fatalities. Another recent book has pointed to the psychological debilitation caused by poverty, [amazon_link id=”1846143454″ target=”_blank” ]Scarcity[/amazon_link] by Sendhil Mullainaithan and Eldar Shafir.

[amazon_image id=”1846143454″ link=”true” target=”_blank” size=”medium” ]Scarcity: Why having too little means so much[/amazon_image]

It seems, though, that a reminder is needed that money (lack of) matters as much because of the social as well as the economic consequences. [amazon_link id=”0300203772″ target=”_blank” ]Hard Times[/amazon_link] argues that the roots of a lack of social resilience stretch back before the crisis. “For all the riches of the millennial years, we found swathes of society that were already sorely exposed by that time.” Rising poverty rates before 2008, declining volunteering, drops in marriage rates (in the US) among some disadvantaged groups and of course rising inequality, all “worked to leave more of the vulnerable braving the storm in effective isolation.”

What to do? Well, it is indeed “wearyingly familiar”. Although the book supports the argument made for example by David Clark and Richard Layard in [amazon_link id=”1846146054″ target=”_blank” ]Thrive[/amazon_link] for additional mental health support, its point is that fundamentally money matters – jobs, a duly enforced minimum wage and decent working conditions, and an adequate safety net. Without an adequate income, and beset by anxiety about financial insecurity, people become isolated. Isolation damages their health and well-being, and causes a vicious cycle of vulnerability and still more insecurity. People with not enough money are not bowling alone, they are just alone.

The economic dilemmas involved in any job market interventions or social security are familiar too, the incentive effects and the trade-offs. But it’s good to be reminded that social consequences should form part of the calculation.

Poverty and inheritance

There’s an old Pelican on my shelves, [amazon_link id=”0804614679″ target=”_blank” ]The Economics of Inheritance[/amazon_link] by Josiah Wedgwood, nicely musty and yellowed. It was first published in 1929; I have the revised 1939 edition.

[amazon_image id=”0804614679″ link=”true” target=”_blank” size=”medium” ]The economics of inheritance,[/amazon_image]

It begins with a discussion of poverty and inequality, including this section.

“Material welfare has no significance except in its relations to men’s feelings and as one element in the psychological state called happiness. And the extent of a man’s happiness depends on the number and intensity of the desires which he is able to satisfy relative to he number and intensity of those which he is not able to satisfy. For this reason, certain religious teachers have striven to achieve happiness by eliminating all desires save those which they believed were capable of complete and permanent satisfaction. By contrast, in the search for material welfare, our modern civilisation under conditions of industrial progress is continually manufacturing new and previously unwanted sources of pleasure, so that old luxuries become new necessities, alike for those who can and cannot afford them. …

“`Though the amount of good and services enjoyed by the poor man in 1924 may be enormously greater than those enjoyed by his predecessor in 1824, the former’s poverty is probably little less tedious and unpleasant to him than an actually more grinding poverty was to the latter.”

There is a very thoughtful review of Julia Unwin’s book [amazon_link id=”1907994165″ target=”_blank” ]Why Fight Poverty?[/amazon_link] on 3am Magazine by the philosopher Richard Marshall (he reviews the whole Perspectives series). Lee Crawfurd also reviews Unwin’s book and takes issue with the idea of relative poverty, expressed above by Josiah Wedgwood.

[amazon_image id=”1907994165″ link=”true” target=”_blank” size=”medium” ]Why Fight Poverty? (Perspectives)[/amazon_image]

Incidentally, I’m pleased to see OUP is bringing out a collection of Richard Marshall’s essays, [amazon_link id=”0199969531″ target=”_blank” ]Philosophy at 3:am[/amazon_link] very soon.

[amazon_image id=”0199969531″ link=”true” target=”_blank” size=”medium” ]Philosophy at 3:AM: Questions and Answers with 25 Top Philosophers[/amazon_image]

As for Josiah Wedgwood, the second half of his book recommends inheritance tax (at 60% or so) and a gift tax, as well as progressive income tax. He wrote: “The ethical arguments in favour of claims to inherit… are extraordinarily weak.” Parents should support their children to give them a good start until they reach adulthood. He rejects the idea of any right to bequeath property. It’s a radical read in today’s climate – but that’s why we have a new gilded class. Like so many others, I’m keen to read Thomas Piketty’s [amazon_link id=”067443000X” target=”_blank” ]Capital in the 21st Century[/amazon_link].

[amazon_image id=”067443000X” link=”true” target=”_blank” size=”medium” ]Capital in the Twenty-First Century[/amazon_image]

Housing word association

The week between Christmas and New Year is always a wonderful time for reading, both books and catching up on the wealth of articles bookmarked in the busy weeks before the holidays. So I’ve had time to read a new London Review of Books essay by James Meek about housing in the UK. Or rather, the housing crisis, as the title has it, in what has become the automatic word association.

As the chart in the article makes perfectly plain, there is a crisis of inadequate supply, on a scale that in the past was addressed by some substantial policy interventions. I am absolutely not a political expert, but it does seem to me that housing is one of the basics that voters will care about – something Margaret Thatcher as well as Aneurin Bevan understood perfectly well.

The Meek article ends with a quote from Julia Unwin of the Joseph Rowntree Foundation: ‘At the turn of the 20th century, the free market had provided squalid slums. We undoubtedly face the re-creation of slums, the enrichment of bad landlords, the risk of people being destitute. Beveridge had soup kitchens. We have food banks. We’ve got something that does take us back full circle, a deep divide in way of life between people who are reasonably well off and those who are poor. There’s always been a difference, but the distinction seems to be more stark now.’

Julia is one of my Perspectives authors, and I highly commend her new book [amazon_link id=”1907994165″ target=”_blank” ]Why Fight Poverty?[/amazon_link] It seems to me spot on in identifying the emotion of fear – fear of becoming poor, fear of poor people – as a barrier to doing anything about poverty.

As it happens, I’ve also commissioned Kate Barker to write a Perspective on the housing crisis, due out later this year. Kate was the author of two authoritative reports on planning and housing a few years ago, and her recommendations in the run up to a UK general election campaign will be essential reading.

[amazon_image id=”1907994165″ link=”true” target=”_blank” size=”medium” ]Why Fight Poverty? (Perspectives)[/amazon_image]

There are a few other books around about housing. I’ve read Neil Monnery’s Safe As Houses which gives a very useful historical and also cross-country overview. A bit old now, but excellent on the economic analysis, is David Miles’s [amazon_link id=”0471952109″ target=”_blank” ]Housing, Financial Markets and the Wider Economy[/amazon_link]. David is on the Monetary Policy Committee and no doubt paying close attention to the current house price surge and mortgage conditions.There are some excellent blogs too – Alex Marsh writes one, Jules Birch another.

[amazon_image id=”B00FOU4GLA” link=”true” target=”_blank” size=”medium” ]Safe as Houses: A Historical Analysis of Property Prices (Paperback) – Common[/amazon_image]