Category: Money

The Psychological Impacts Of Poverty, Digested

street of long abandoned and derelict collapsing houses and commercial buildings

By Emma Young

For a “rich” country, by global standards, the UK has an awful lot of people who are not. Fourteen million people — one fifth of the population — live in poverty. Of these, four million are more than 50% below the poverty line, and 1.5 million are classed as destitute, unable to afford even basic life essentials.

For children who grow up in poverty, there are impacts that go way beyond the fact of material shortages. “Children experience poverty as an environment that is damaging to their mental, physical, emotional and spiritual development,” notes UNICEF. Clearly, there’s a critical role for psychological research in this area, first in revealing just what poverty does to children and adults — but also in developing strategies to ameliorate those impacts.

Continue reading “The Psychological Impacts Of Poverty, Digested”

Giving People Simple “Moral Nudges” Encourages Them To Donate Much More To Charity

Woman collecting money for charity and holds jar with coins.

By Emma Young

How do you persuade people to do the “right thing” when there’s a personal price to pay? What convinces someone to spend time and effort on a task like recycling batteries, for example — or literally spend cash by giving to people in desperate need?

It’s an important question. “Finding mechanisms to promote pro-social behaviour is fundamental for the wellbeing of our societies and is more urgent than ever in a time of key global challenges such as resource conservation, climate change and social inequalities,” write the authors of a new paper, published in Scientific Reports. Across a series of five online studies involving a total of more than 3,000 participants, Valerio Capraro at Middlesex University of London and colleagues provide evidence for a cheap, effective method: simply “nudging” people to reflect on what is the morally right thing to do. This simple intervention had some impressive effects, even increasing actual charitable donations by close to half.

Continue reading “Giving People Simple “Moral Nudges” Encourages Them To Donate Much More To Charity”

In the “Trust Game”, men with more autistic traits were less influenced by their partner’s facial appearance 

By Emma Young

We make all kinds of snap decisions about a person based on their facial appearance. How trustworthy we think they are is one of the most important, as it can have many social and financial consequences, from influencing our decisions about whether to lend someone money to which Airbnb property to book.

However, as the authors of a new study, published in the British Journal of Psychology, note, “Although facial impressions of trustworthiness are formed automatically, they are not especially accurate predictors of trustworthy behaviour.” People who are less susceptible to forming these impressions could, then, be at an advantage. And, as Jasmine Hooper at the University of Western of Australia and colleagues now report, men with high levels of autistic traits fall into this category. 

Continue reading “In the “Trust Game”, men with more autistic traits were less influenced by their partner’s facial appearance “

The “experiential advantage” is not universal – the less well-off get equal or more happiness from buying things

By guest blogger Juliet Hodges

Being rich(er) may not guarantee happiness, as shown by ample evidence from the social sciences, but there are ways of spending money that will make you happier than others. Recent research has uncovered the “experiential advantage”: greater happiness from spending money on experiences (holidays, meals, theatre tickets) instead of material things (gadgets, clothes, jewellery). This could be for a number of reasons, such as experiences being more closely aligned with our values and being less likely to produce rumination and regret. There are exceptions to this rule, of course. Studies have found that personality traits can influence whether experiences or things make a person happiest; for example, introverts are made much happier by spending vouchers in a bookshop than a bar.

Another likely exception, that hasn’t previously been studied, is how social class, and specifically access to resources, affects this experiential advantage. Indeed, most research in this area has been performed with college students, who are typically more affluent than the general population, and there are reasons to believe that those who are less well-off might prefer material goods. For them, buying things as opposed to experiences could be more practical: they last longer, can be used multiple times and potentially resold in the future. To put this reasoning to the test, a recent paper in Psychological Science investigated whether the experiential advantage is diminished or absent for people who can afford very little compared with those who can afford a lot.

Continue reading “The “experiential advantage” is not universal – the less well-off get equal or more happiness from buying things”

Does receiving favours and freebies make you uncomfortable? Maybe you have “reciprocity anxiety”

GettyImages-958332394.jpg

By Christian Jarrett

Years ago, my wife and I were window shopping in the Brighton lanes when we decided to enter a posh perfume store to take a closer sniff. A smiling sales woman approached and, to our delight, offered us each a complimentary glass of sparking wine and some nibbles. Soon though, our glee turned to discomfort: could we really just walk out having enjoyed the freebies? Conspiring like thieves, we decided that although we wouldn’t buy anything (not that we could have afforded to), we had better stay and look interested a while longer; we even dropped a false hint to the woman at our likely return.

According to a team of researchers led by Xiling Xiong at Zhejiang University in China, my wife and I were suffering from an acute bout of reciprocation anxiety. In their new paper in the Journal of Economic PsychologyXiong and his colleagues propose that this is not just a state, but a trait – a specific kind of social anxiety – that some of us are more prone to than others, and what’s more, they’ve created a new questionnaire to measure it.

Continue reading “Does receiving favours and freebies make you uncomfortable? Maybe you have “reciprocity anxiety””

Contrary to stereotypes, study of hedge fund managers finds psychopaths make poor investors

GettyImages-457803795.jpgBy Emma Young

If you’re a psychopath who’s good with numbers, you could make the perfect hedge fund manager. Your lack of empathy will allow you to capitalise blithely on the financial losses of others, while your ability to stomach high-risk, but potentially high-return, options will send your fund value soaring…. Well, that’s the story that’s been painted by popular media, folk wisdom and Wall Street insiders alike. The problem, according to a new paper in Personality and Social Psychology Bulletin, is that hedge fund managers with psychopathic tendencies actually make less money for their clients.

Continue reading “Contrary to stereotypes, study of hedge fund managers finds psychopaths make poor investors”

We have an ingrained anti-profit bias that blinds us to the social benefits of free markets

GettyImages-1538307.jpgBy Christian Jarrett

“Harnessing the ‘base’ motive of material self-interest to promote the common good is perhaps the most important social invention mankind has yet achieved,” said the American economist Charles Schultz. And you can see why. While acknowledging its problems, many credit free market capitalism for the dramatic reduction over recent decades in the proportion of people in the world living in extreme poverty, not to mention rising health standards and technological advances. Conversely, according to some commentators, one only has to look to modern-day Venezuela to see the dangers of extreme anti-profit socialism.

And yet, according to a new paper in Journal of Personality and Social Psychology, most of us have an instinctual anti-profit bias. We view for-profit companies and industries – upon which capitalism is based – with inherent distrust, assuming that the more profitable they are, the more harm they do to society. In fact, research shows the opposite is true: companies that make greater profits actually tend to contribute more value to society, for example in terms of their environmental responsibility and corporate philanthropy.

The authors of the new paper, led by Amit Bhattacharjee at Erasmus University, believe this anti-profit bias leads many voters and politicians to endorse anti-profit policies that are likely to lead to the very opposite outcomes for society that they want to achieve. “Erroneous anti-profit beliefs may lead to systematically worse economic policies for society, even as they help people satisfy their social and expressive needs on an individual level” they said.

Continue reading “We have an ingrained anti-profit bias that blinds us to the social benefits of free markets”

Find a sense of purpose and you’re more likely to get rich

Young woman with long hair staring into the cameraBy Christian Jarrett

As the dawn breaks on a new year, now might be a good time to think about what you want to get out of life over the longer-term. We already know from past research that having a greater “sense of purpose” is good for us psychologically: it’s linked with experiencing more positive emotions and generally feeling better about life. Now a study in the Journal of Research in Personality suggests there are material benefits too. Researchers followed the same sample of people over a period of about nine years, and they found that during that time, those individuals who reported a greater sense of purpose at the study start had accumulated greater wealth.  Continue reading “Find a sense of purpose and you’re more likely to get rich”

In it together: How we become less individualistic during harsh economic times

Team Huddle Harmony Togetherness Happiness Concept
It’s an effect that’s reflected in pop songs and baby names 

By Alex Fradera

The Great Depression gives us a vivid picture of a time when economic hardship rekindled a sense of the collective. Politics took on a greater obligation to common welfare, new workers’ institutions sprang up, and society developed through charitable movements and new habits. More broadly, we know that as societies grow richer, they tend to focus on the individual more than on the community. These trends are fed by political decisions, institutions, and indeed new generations born into the times, but is there also a psychological component to this, operating at the level of individuals? New research in Journal of Personality and Social Psychology by Emily Bianchi at Emory University suggests the answer is yes – subtle fluctuations in American national economic health, too brief for society to change wholesale, nonetheless push each one of us between We and Me. Continue reading “In it together: How we become less individualistic during harsh economic times”

Money worries can enhance performance on some kinds of mental test

Poverty erects material barriers, but psychological ones too, from the conditions that exacerbate mental health problems, to inculcating children with the sense that they are second-rate. A stream of recent research has suggested that financial concerns can also tax your mind and prevent you from thinking clearly. But that may be too sweeping a conclusion, according to Junhua Dang of Lund University and his colleagues in Sweden and China. Their study, published in the Scandinavian Journal of Psychology, suggests having money problems on the mind doesn’t always impair cognitive ability. In fact, it can even enhance it.

The prior studies had shown worse performance on intelligence tests by poorer participants when they were asked to think about financial issues beforehand, because of how these issues loaded their “working memory” – their ability to hold and process information over short time periods – thus hindering the mental manipulations the tests required. But working memory isn’t key to all cognitive work, so Dang’s team set out to see if other kinds of mental tasks would be unaffected by monetary angst.

The participants performed a categorisation task, some of them after being prompted to think about their financial woes. They then viewed a series of basic but rich images – a shape that could be square or circle, yellow or blue, and contained one or two symbols coloured red or green – and attempted to sort each one into the correct category A or B. There was a learning element to the task provided by feedback after each image, telling them whether they’d made the correct categorisation or not.

Category membership didn’t rely on a formal rule, e.g. “Category A contains all yellow squares”;
instead, it depended on a looser accumulation of properties: the most A-like shape might be yellow and square with a single red symbol, but you could swap out any one or even two of those qualities, and it would still count as an A.

This kind of challenge is known as a “procedural cognition” task because success depends more on automatic processes rather than consciously thinking it through. In fact, judgments based on similarity and gut feeling are usually a better tactic than trying to test out and juggle different explicit rules. Crucially, the gut feeling approach doesn’t require spare working memory capacity and can even be facilitated by a lack of it. Therefore financial woes might be expected to enhance rather than hinder the performance of poor people on the categorisation task.

That’s what Dang’s team found in their sample of 97 student participants. Those who were reminded of their money worries, and those with below-average family income (relative to the other participants), performed better on the task, being quicker to meet the success criteria of eight correct categorisations in a row.

The authors argue this matters because highly conceptual activities, such as those measured by intelligence tests and which require lots of deliberate mental calculation, may not be a fair reflection of the kinds of mental work that lower-income people often engage in or depend on in their jobs. For example, a trucker is likely to rely much more on the relatively automatic and instinctive processes that make up safe, effective driving. This is not to make a facile argument such as “financial stress is good for the poor”, but rather to make the point that even if such stress does impede some parts of poorer people’s lives, in other capacities they will be able to operate strongly in spite of, or even in small part due to, this stress.

This relates to a wider point that Dang makes in a commentary on the previous research, which is that although stress is unwelcome, it does have a function, which is to narrow our focus “away from irrelevant tasks (which IQ tests arguably are) toward relevant tasks (which financial decision making arguably is).” This research, therefore, is part of a wider body suggesting that the consequences of poverty are not unrelentingly negative, but varied and multifaceted.

When the poor excel: Poverty facilitates procedural learning

further reading
Poverty shapes how children think about themselves
The adaptive mind: Children raised in difficult circumstances show enhanced mental flexibility in adulthood
Why is poverty associated with mental health problems for some people, but not others?

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Post written by Alex Fradera (@alexfradera) for the BPS Research Digest.

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