Thursday, November 29, 2012
Poor people often do things that are against their long-term interests such as playing the lottery, borrowing too much and saving too little. Shah, Mullainathan and Sahfir have a new theory to explain some of these puzzles. SMS argue that immediate problems draw people’s attention and as people use cognitive resources to solve these problems they have fewer resources left over to solve or even notice other problems. In essence, it’s easier for the rich than the poor to follow the Eisenhower rule–”Don’t let the urgent overcome the important”–because the poor face many more urgent tasks. My car needed a brake job the other day – despite this being a relatively large expense I was able to cover it without a second’s thought. Compared to a poorer person I benefited from my wealth twice, once by being able to cover the expense and again by not having to devote cognitive resources to solving the problem.
Plausible. Something happens at the other end too, when Big Law lawyers et al. don't have time to do the ultimately important things (talk to their children, etc.) --TS