causes of poverty, economics, poverty

The Causes of Poverty (78): High Discount Rates and Lack of Delayed Gratification

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You talk to conservatives about the reasons why poor people are poor, and chances are that the discussion turns to lack of self-control, high discount rates and inability to delay gratification. “High discount rates” means that things in the present or near future are viewed as having a higher payoff than things in the distant future. If you have a high discount rate, you focus on immediate gratification. This in turn shows up in low savings rates, high debt, obesity, teen pregnancy, drug use, high drop out rates, low school attendance and other vices supposedly common among the poor.

Some even argue that differences between people in the apparent levels of self-control, discount rates or time preferences – which is all the same thing – appear at a very early age and are therefore probably innate. The famous marshmallow test will then get a favorable citation: you give kids a marshmallow and tell them they can either eat it now or, if they wait a few minutes, have two marshmallows. Kids who wait do better later in life.

However, recent studies have suggested that the marshmallow test does not, in fact, reveal innate (in)ability. The environment in which tests such as these take place determines to a large extent the levels of self-control revealed through them. Whether or not people are capable of delayed gratification depends not on their abilities but on their assessment of the reliability of the world around them. When the world is not worthy of trust, the best course of action is often to live for today.

This attitude towards the world and the future is probably internalized from a young age onward, which makes it hard to change. What it takes is to offer young children a reliable environment allowing them to develop levels of trust which will in turn yield low discount rates and the ability to delay gratification later in life. But in order to do that we’ll need to reduce parental poverty. Claims about lack of self-control as a cause of poverty then have things completely backward. Rather than a cause we’re dealing with an effect of poverty.

More posts in this series are here.

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3 thoughts on “The Causes of Poverty (78): High Discount Rates and Lack of Delayed Gratification

  1. William Childers says:

    To what degree, based on objective data, are some things innate… i.e. a function of dna or inherited inclinations? And where this is the case, then is it not a purely human characteristic…. an inherent part of the human distribution of traits? And if it’s a purely inherent part of the human distribution who among humans get the right or privilege to deem each such trait as being an unworthy or worthy one? I would thus submit that those who deem others less worthy in some innate characteristic than themselves are those that have taken power over the others…. such that the traits deemed to be worthy in others also serve the interests of those power, while those deemed unworthy are directly or indirectly detrimental to the interests of those in power.

    It’s therefore obvious that the state of “poor” is a condition that is “their own fault” because that’s the only acceptable justification (more aptly stated, self-serving rationalization) of those in power to avoid assuming responsibility as human beings for insuring the poor are provided with the conditions and benefits to make them not poor. This is simply the social Darwinist’s way of rationalizing their own benefits.

  2. Pingback: The Causes of Poverty (79): Poverty Traps | P.a.p.-Blog // Human Rights Etc.

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