New Delhi, Aug. 31: Financial worries may impair mental ability and drive people towards taking bad decisions.

A study that observed mall-shoppers in America and sugarcane farmers in India has found that scarcity of money can severely erode intellectual abilities, generating the first experimental evidence for the idea that poverty can trigger unwise behaviour.

The study by a team of economists and psychologists has suggested that poverty can overwhelm mental ability and lead to a drop in cognitive functions. The findings appeared on Friday in the US research journal Science.

Using standardised tests, the researchers observed that financial worries caused a drop in intellectual functions that was equivalent to the effect of losing a full night’s sleep or chronic alcoholism or a 13-point drop in IQ.

“The size of this effect was a surprise,” said Eldar Shafir, professor of psychology at Princeton University in the US and a team member who specialises in how people take decisions during situations of uncertainty. “Poverty draws on human mental bandwidth that leaves less mind for other things.”

Several studies since the mid-1990s have shown associations between poverty and what researchers describe as counterproductive behaviour — inefficient management of time and money, bad parenting, or poor productivity at work. The poor have also been seen as less likely to engage in preventive health actions.

“Much of such behaviour that at times has been attributed to lack of motivation, will power, or intelligence may be caused by lowered attention resources, directly triggered by the state of poverty,” Anandi Mani, an India-born economist, associate professor at the University of Warwick in the UK, and the first author of the study, told The Telegraph. “The same people may have more mental capacity and attention to apply when they have more money.”

The researchers first presented 101 shoppers in a mall in New Jersey with four hypothetical scenarios describing financial problems and tested them for cognitive functions through computer-based tasks while they were pondering the scenarios.

They found that the thoughts about finances reduced cognitive performance more among the poor than among the well-off participants.

In their field experiment, the researchers tested 464 sugarcane farmers from 54 villages in Tamil Nadu before the harvest — a period of diminished financial resources — and after the harvest when they had earned money by selling sugarcane.

The study found that the same farmers who showed reduced cognitive performance before harvest displayed higher cognitive performance after the harvest, an effect that could not be explained through differences in nutrition, stress or work effort.

Experts who have been studying poverty say the findings provide experimental evidence for something observed for long.

“It is well-established that poverty can lead to poor decision-making,” said Amita Baviskar, associate professor at the Institute of Economic Growth, New Delhi, who was not connected with the study, but specialises in the cultural politics of development with a focus on social inequality.

“But this study’s significance probably lies in its methodology that has allowed economists to rigorously prove this effect,” Baviskar told this newspaper. “This seems part of recent trends in economics towards controlled experiments to gain insights into social behaviour that might guide public policy.”

The researchers are hoping their findings will help shape policies.

“Public policies should be sensitive not just to the lack of money among the poor but also the reduced cognitive capacity,” said Mani, who is also a research fellow at the Centre for Competitive Advantage in the Global Economy at Warwick.

“Messages about new technologies or health practices, or changes in behaviour intended for the poor should be timed for when they have greater mental bandwidth. For farmers, for example, it could be just after the harvest — this could increase their receptivity to such messages.”

The other study team members were Sendhil Mullainathan, professor of economics at Harvard University, and Jiaying Zhao, assistant professor of psychology at the University of British Columbia in Canada.

WORRY METER

Financial woes can severely reduce mental functions equivalent to the effects of:

• Losing one full night’s sleep
• Chronic alcoholism
• A 13-point drop in standardised IQ