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Financial desperation squeezes the cognitive juice right out of you. In 2013, Harvard researchers did a study of how financial stress affects decision making.

Financial desperation squeezes the cognitive juice right out of you. In 2013, Harvard researchers did a study of how financial stress affects decision making. Denise Cummins, Ph.D. explains their findings in Psychology Today: "When the cost of [a car] repair was increased to $3,000, a very different picture emerged: The cognitive performance of those at the upper end of the income distribution was unaffected by the increase. But those at the lower end suffered a 40% decline! The authors interpreted this to mean that scarcity impaired people’s ability to think clearly. The threat—even an imagined threat—of a large bill made it difficult for poor people to focus on the cognitive tasks at hand." Financial stress impedes human thinking / problem solving. People get consumed by the short term challenges in front of them, and can’t see the big picture. Sources: http://www.sciencemag.org/content/341/6149/976 http://www.sciencemag.org/content/341/6149/976 http://www.psychologytoday.com/blog/good-thinking/201309/why-having-too-little-leads-bad-decisions http://www.psychologytoday.com/blog/good-thinking/201309/why...

tptacek 11y ago
I was thinking about that, and about the story of Ferguson Missouri, where some huge portion of the (largely African American) population had arrest warrants over petty fines that had blossomed through late fees and default judgements into financial catastrophes levied by the (largely middle class white) municipal government, with the last few suggestions.
- derefr 11y ago
  Instead of Universal Basic Income, how about Universal Basic Food Stamps? It feels like, rather than a basic income, we need two orthogonal currencies: one for necessities (food, rent, utilities) and one for niceities. Everyone would just have two numbers in their bank account, for each of the country's two official currencies. Basic income would be paid in one, while all income from trade in the economy would be in the other. Economists liken money to votes for demand in a decentralized allocation scheme. They liken taxes and fines to punishing people by taking away their voting-weight in said scheme, relegating them to suboptimal options that they wouldn't have voted for. (Basically, the equivalent of pairing them up with a non-first-choice partner in the Stable Marriage Problem.) This works fine at a theoretical level where every agent is participating in economy X without depending on economy X (e.g. an economy consisting wholly of foreign investors), but falls apart when people are expected to also eat and live in some of the things they vote for, because those things have inelastic demand—taxing/fining people doesn't make them consume any less of those things, because they need to consume those things; and frequently inelastic supply—there just aren't options for places to live below a certain cost, because all the suppliers' prices are being "floated up" by said inelastic demand. If, instead, we said something like: • A new currency—"necessity dollars"—is allocated to people by the government each month to pay for a basket of goods with inelastic demand. The original currency persists, renamed "nicety-dollars." • Necessity-dollars can only be used for goods and services with inelastic demand (as found by the BLS during CPI calculation), though they are not restricted to goods with any particular "moral cleanliness" value (so cigarettes are just as applicable as bread†.) This is enforced by only permitting certain sellers to accept necessity-dollars, and only on certain transactions. • At point-of-first-sale, necessity-dollars are actually sent off to the government and the seller receives nicety-dollars instead. There's probably some exchange-rate involved, that the government can manipulate to some interesting end. Thus, companies never hold necessity-dollars, or pay out in necessity-dollars; they're just a thing individuals have and transparently give back to the government at payment-processing time. • You can't tax or fine anyone in necessity-dollars. People just receive them, hold them in an account, and spend them voluntarily, and that's it: no other operations are valid. Importantly, banks aren't allowed to impose necessity-dollar fees on necessity-dollar accounts for holding them, and so forth. (They could impose nicety-dollar fees on fancy necessity-dollar accounts, but see the next point:) • If you get taxed or fined or liened or collected on for anything in nicety-dollars, and you don't have enough nicety-dollars, this doesn't "spill over": you can't pay a nicety-dollar cost in necessity-dollars. You're not allowed. This means that if you run out of nicety-dollars, you're effectively bankrupt (in all the current meanings of that word—all the same machinery kicks in), while still being able to afford necessities. Your niceity-creditors get chased off/annulled by your bankruptcy, without disrupting your ability to afford necessities. --- † Addiction causes need just like hunger does. You can't really economically disincentivize addicts from seeking a fix; that's basically definitional. Addicts under pressure commit crimes to get the money to pay for their fix, rather than going without. Just freakin' build the infrastructure to treat addiction, if you don't want people spending taxpayer money that way.
  - andrewjl 11y ago
    The gap that I see in this approach is everyone has a different definition of what is a nicety and what is a necessity. To go with your tobacco example, I personally don't believe that tobacco should be considered a necessity. (Though I have no problem with Nicorette / nicotine gum being in that category, which could be used by someone unable to buy cigarettes to satisfy their craving.) Someone else may have a different definition of a necessity vs nicety altogether. It's much simpler IMO to just give people ordinary currency, and let them decide how to spend it best.
    - derefr 11y ago
      Note that by my specific definition above, it doesn't really matter what's a "necessity"—that's just a cute flavor-word. They're really "inelastic-demand dollars." And my point was that even UBI falls over when someone gets their UBI taken away by a fine. Starving is starving.
      - andrewjl 11y ago
        Agree with you about the fines. Everyone has a slightly different demand elasticity for certain goods. To use myself as an example, I would buy the same amount of coffee if the price doubled tomorrow, but someone else may choose to cut back on their coffee consumption.
      - tehmaco 11y ago
        Not sure on the viability of it, but couldn't there be something in place that states that fines can only be levied at a maximum 10%/month of the UBI? So if you get a parking ticket (presumably <1% UBI), you can just pay it, but if you get a large fine (20% UBI), you'd pay it off in two monthly payments of 10% each. You'd probably need something in place to intervene if someone's constantly paying 10% every month due to multiple fines to prevent people racking up daft amounts of fines and just 'living on 90%'
  - dnautics 11y ago
    * This is enforced by only permitting certain sellers to accept necessity-dollars, and only on certain transactions. there are so many reasons why this wouldn't work. The whole point of UBI is that you are not creating a judgemental system by which certain products are or are not reified by the system. Would tampons be covered by UBFS? Let's say then we allow for UBFS to cover female menstrual products. Would cups then be covered? Why or why not? How would you validate a product as being "for a given use"? How much political maneuvering would be required to get a permit for a product? * inelastic demand (as found by the BLS during CPI calculation) Pray tell how does one measure demand elasticity[0]? And if you're entrusting the BLS to do this, will they apply fudge factors? Why or why not? Who gets to influence the BLS to get the 'stats right' on their * You can't tax or fine anyone in necessity-dollars one word: Arbitrage. [0] usually a merchant does this by dicking around with the price.
throwawaytime 11y ago
"When the cost of [a car] repair was increased to $3,000, the cognitive performance of those at the upper end of the income distribution was unaffected by the increase. But those at the lower end suffered a 40% decline! The authors interpreted this to mean that scarcity impaired people’s ability to think clearly. The threat—even an imagined threat—of a large bill made it difficult for poor people to focus on the cognitive tasks at hand." That's me. I was recently fired for having severe narcolepsy. (Irony: The medication that might help with this condition for the first time in my life arrives tomorrow, a few days before our health insurance runs out.) It's been surreal to be excluded from most life aspirations due to being unable to participate in the 9 to 5 that society expects. Part of why it's hard is that no one can relate to this at all. When you throw your back out and are unable to work, people understand. When you arrive at 1pm because you have no memory of waking up and turning off all three of the alarms you'd set, no one cares why. You're damaged goods. A basic income would at least assist with searching for my next job. My wife and I are now in a situation where we either start receiving income within three months max, or completely run out of money. I know intellectually what needs to be done: Port a webapp from an older framework to a next-gen framework, then write a detailed post about how it was done and what the benefits were. That would be enough social standing to at least get some freelancing gigs. Trouble is, I'm completely frozen. It's not quite fear -- closer to profound loss of hope. When a medical condition excludes you from society, it's easy to let it get the better of you, or feel bitter. Those are precisely the opposite feelings that will result in income. In that light, it's not strange that a $3,000 bill would reduce someone's performance by 40%. Even if it's not a disaster, you end up wishing that you could take your wife on that honeymoon you've talked about for four years. When it took 6 months to save up $3,000 dispite a decently high salary, you know that your future will never be free from the "money problem," and that it will permeate every aspect of your life. So what do you do? Try to be intelligent, of course. Try to see your situation as amusing. Amusement, yes; anger, no. It's easier to deconstruct a problem when it feels like a puzzle rather than a prison. Easy to say that. What do I do? Pull up React docs while trying not to cry. None of my ambitions matter anymore. Life is a years-long process of trying to recover from a tailspin. I'm 28; blink a few times and I'll be 50. A basic income might help. When the company fired me without notice, they mentioned that our health and dental insurance will expire at the end of the month. This translates into a few things: (a) an extra $350/mo of bills, which accelerates our impending bankruptcy; (b) choose to remove my wisdom teeth and get a root canal right now, this week, which will knock me out for at least two weeks when I have to perform, and will cost at least 15% of our reserves anyway, so I'm not going to do that. Maybe it will result in messed up teeth for life, but that's an abstract problem that Future Me will deal with later. On the other hand, maybe a basic income would hurt. I don't want handouts. I want to participate in life and to add value to my pursuits, just like you. It's easy to imagine feeling like maybe this basic income should be my lot in life. At least if I know we'll hit a brick wall in 3 months and that my wife won't be able to graduate, I can sort of force myself to try to use React / etc, and to otherwise hustle. But I miss being 13, when life was an endless intellectual playground, and that "forcing yourself to have fun learning a programming framework" was an absurd contradiction. Why post this? I don't know. It's not a sob story, and it's not really a warning. It seems like no one else will learn a thing from any of this. But at least it won't seem so mysterious that a $3,000 bill can subvert you.
kamaal 11y ago
>>The threat—even an imagined threat—of a large bill made it difficult for poor people to focus on the cognitive tasks at hand. This issue happens because one has to constantly juggle many priorities in the mind all at one time. This can come down very heavily on a person. To have to make decisions to chose one over the other, a.k.a making sacrifices can be soul depleting if done for a very long time. There are often conflicting priorities many demanding attention at the same time. In case of trade off you often stand to lose something for the other.

tptacek 11y ago

I was thinking about that, and about the story of Ferguson Missouri, where some huge portion of the (largely African American) population had arrest warrants over petty fines that had blossomed through late fees and default judgements into financial catastrophes levied by the (largely middle class white) municipal government, with the last few suggestions.

derefr 11y ago
Instead of Universal Basic Income, how about Universal Basic Food Stamps? It feels like, rather than a basic income, we need two orthogonal currencies: one for necessities (food, rent, utilities) and one for niceities. Everyone would just have two numbers in their bank account, for each of the country's two official currencies. Basic income would be paid in one, while all income from trade in the economy would be in the other. Economists liken money to votes for demand in a decentralized allocation scheme. They liken taxes and fines to punishing people by taking away their voting-weight in said scheme, relegating them to suboptimal options that they wouldn't have voted for. (Basically, the equivalent of pairing them up with a non-first-choice partner in the Stable Marriage Problem.) This works fine at a theoretical level where every agent is participating in economy X without depending on economy X (e.g. an economy consisting wholly of foreign investors), but falls apart when people are expected to also eat and live in some of the things they vote for, because those things have inelastic demand—taxing/fining people doesn't make them consume any less of those things, because they need to consume those things; and frequently inelastic supply—there just aren't options for places to live below a certain cost, because all the suppliers' prices are being "floated up" by said inelastic demand. If, instead, we said something like: • A new currency—"necessity dollars"—is allocated to people by the government each month to pay for a basket of goods with inelastic demand. The original currency persists, renamed "nicety-dollars." • Necessity-dollars can only be used for goods and services with inelastic demand (as found by the BLS during CPI calculation), though they are not restricted to goods with any particular "moral cleanliness" value (so cigarettes are just as applicable as bread†.) This is enforced by only permitting certain sellers to accept necessity-dollars, and only on certain transactions. • At point-of-first-sale, necessity-dollars are actually sent off to the government and the seller receives nicety-dollars instead. There's probably some exchange-rate involved, that the government can manipulate to some interesting end. Thus, companies never hold necessity-dollars, or pay out in necessity-dollars; they're just a thing individuals have and transparently give back to the government at payment-processing time. • You can't tax or fine anyone in necessity-dollars. People just receive them, hold them in an account, and spend them voluntarily, and that's it: no other operations are valid. Importantly, banks aren't allowed to impose necessity-dollar fees on necessity-dollar accounts for holding them, and so forth. (They could impose nicety-dollar fees on fancy necessity-dollar accounts, but see the next point:) • If you get taxed or fined or liened or collected on for anything in nicety-dollars, and you don't have enough nicety-dollars, this doesn't "spill over": you can't pay a nicety-dollar cost in necessity-dollars. You're not allowed. This means that if you run out of nicety-dollars, you're effectively bankrupt (in all the current meanings of that word—all the same machinery kicks in), while still being able to afford necessities. Your niceity-creditors get chased off/annulled by your bankruptcy, without disrupting your ability to afford necessities. --- † Addiction causes need just like hunger does. You can't really economically disincentivize addicts from seeking a fix; that's basically definitional. Addicts under pressure commit crimes to get the money to pay for their fix, rather than going without. Just freakin' build the infrastructure to treat addiction, if you don't want people spending taxpayer money that way.
- andrewjl 11y ago
  The gap that I see in this approach is everyone has a different definition of what is a nicety and what is a necessity. To go with your tobacco example, I personally don't believe that tobacco should be considered a necessity. (Though I have no problem with Nicorette / nicotine gum being in that category, which could be used by someone unable to buy cigarettes to satisfy their craving.) Someone else may have a different definition of a necessity vs nicety altogether. It's much simpler IMO to just give people ordinary currency, and let them decide how to spend it best.
  - derefr 11y ago
    Note that by my specific definition above, it doesn't really matter what's a "necessity"—that's just a cute flavor-word. They're really "inelastic-demand dollars." And my point was that even UBI falls over when someone gets their UBI taken away by a fine. Starving is starving.
    - andrewjl 11y ago
      Agree with you about the fines. Everyone has a slightly different demand elasticity for certain goods. To use myself as an example, I would buy the same amount of coffee if the price doubled tomorrow, but someone else may choose to cut back on their coffee consumption.
    - tehmaco 11y ago
      Not sure on the viability of it, but couldn't there be something in place that states that fines can only be levied at a maximum 10%/month of the UBI? So if you get a parking ticket (presumably <1% UBI), you can just pay it, but if you get a large fine (20% UBI), you'd pay it off in two monthly payments of 10% each. You'd probably need something in place to intervene if someone's constantly paying 10% every month due to multiple fines to prevent people racking up daft amounts of fines and just 'living on 90%'
- dnautics 11y ago
  * This is enforced by only permitting certain sellers to accept necessity-dollars, and only on certain transactions. there are so many reasons why this wouldn't work. The whole point of UBI is that you are not creating a judgemental system by which certain products are or are not reified by the system. Would tampons be covered by UBFS? Let's say then we allow for UBFS to cover female menstrual products. Would cups then be covered? Why or why not? How would you validate a product as being "for a given use"? How much political maneuvering would be required to get a permit for a product? * inelastic demand (as found by the BLS during CPI calculation) Pray tell how does one measure demand elasticity[0]? And if you're entrusting the BLS to do this, will they apply fudge factors? Why or why not? Who gets to influence the BLS to get the 'stats right' on their * You can't tax or fine anyone in necessity-dollars one word: Arbitrage. [0] usually a merchant does this by dicking around with the price.

throwawaytime 11y ago

"When the cost of [a car] repair was increased to $3,000, the cognitive performance of those at the upper end of the income distribution was unaffected by the increase. But those at the lower end suffered a 40% decline! The authors interpreted this to mean that scarcity impaired people’s ability to think clearly. The threat—even an imagined threat—of a large bill made it difficult for poor people to focus on the cognitive tasks at hand." That's me. I was recently fired for having severe narcolepsy. (Irony: The medication that might help with this condition for the first time in my life arrives tomorrow, a few days before our health insurance runs out.) It's been surreal to be excluded from most life aspirations due to being unable to participate in the 9 to 5 that society expects. Part of why it's hard is that no one can relate to this at all. When you throw your back out and are unable to work, people understand. When you arrive at 1pm because you have no memory of waking up and turning off all three of the alarms you'd set, no one cares why. You're damaged goods. A basic income would at least assist with searching for my next job. My wife and I are now in a situation where we either start receiving income within three months max, or completely run out of money. I know intellectually what needs to be done: Port a webapp from an older framework to a next-gen framework, then write a detailed post about how it was done and what the benefits were. That would be enough social standing to at least get some freelancing gigs. Trouble is, I'm completely frozen. It's not quite fear -- closer to profound loss of hope. When a medical condition excludes you from society, it's easy to let it get the better of you, or feel bitter. Those are precisely the opposite feelings that will result in income. In that light, it's not strange that a $3,000 bill would reduce someone's performance by 40%. Even if it's not a disaster, you end up wishing that you could take your wife on that honeymoon you've talked about for four years. When it took 6 months to save up $3,000 dispite a decently high salary, you know that your future will never be free from the "money problem," and that it will permeate every aspect of your life. So what do you do? Try to be intelligent, of course. Try to see your situation as amusing. Amusement, yes; anger, no. It's easier to deconstruct a problem when it feels like a puzzle rather than a prison. Easy to say that. What do I do? Pull up React docs while trying not to cry. None of my ambitions matter anymore. Life is a years-long process of trying to recover from a tailspin. I'm 28; blink a few times and I'll be 50. A basic income might help. When the company fired me without notice, they mentioned that our health and dental insurance will expire at the end of the month. This translates into a few things: (a) an extra $350/mo of bills, which accelerates our impending bankruptcy; (b) choose to remove my wisdom teeth and get a root canal right now, this week, which will knock me out for at least two weeks when I have to perform, and will cost at least 15% of our reserves anyway, so I'm not going to do that. Maybe it will result in messed up teeth for life, but that's an abstract problem that Future Me will deal with later. On the other hand, maybe a basic income would hurt. I don't want handouts. I want to participate in life and to add value to my pursuits, just like you. It's easy to imagine feeling like maybe this basic income should be my lot in life. At least if I know we'll hit a brick wall in 3 months and that my wife won't be able to graduate, I can sort of force myself to try to use React / etc, and to otherwise hustle. But I miss being 13, when life was an endless intellectual playground, and that "forcing yourself to have fun learning a programming framework" was an absurd contradiction. Why post this? I don't know. It's not a sob story, and it's not really a warning. It seems like no one else will learn a thing from any of this. But at least it won't seem so mysterious that a $3,000 bill can subvert you.

kamaal 11y ago

>>The threat—even an imagined threat—of a large bill made it difficult for poor people to focus on the cognitive tasks at hand. This issue happens because one has to constantly juggle many priorities in the mind all at one time. This can come down very heavily on a person. To have to make decisions to chose one over the other, a.k.a making sacrifices can be soul depleting if done for a very long time. There are often conflicting priorities many demanding attention at the same time. In case of trade off you often stand to lose something for the other.