The Impact of Community Trust on Poverty
It is now well-known that most individuals tend to discount future outcomes relative to the present. Coined present bias, many of our sub-optimal behaviors are attributed to this mode of thought. But is such temporal discounting always irrational? Perhaps it is not —particularly when we consider the scarcity of cognitive (and other) resources. Sometimes it might make complete sense to focus on the present, especially if your future feels unreliable or uncertain.
In support of this, experimental research shows that scarcity-induced focus might not necessarily be myopia, but a shifted attention toward specific expenses while disregarding others (Shah, Mullainathan, & Shafir, 2012). Additionally, poverty related concerns can consume mental resources and reduce individuals’ cognitive control abilities, which are necessary for making optimal choices (Mani, Mullainathan, Shafir, & Zhao, 2013).
Unfortunately, this kind of mindset can lead to a vicious cycle: individuals in poverty — often as a result of financial constraints — tend to make financial, health, and educational decisions that favor the present. In turn, their long-term financial, health, and educational outcomes suffer, feeding back into the cycle of poverty. So how can people possibly escape this pattern?
Research by Jachimowicz and colleagues (2017) suggests that, while having lower socioeconomic status does influence the likelihood of making short-sighted decisions, this type of myopic decision making can be mitigated by community trust. The researchers hypothesized that community trust may act as a buffer for low-income individuals as a way of protecting against potential losses. Such support could act as a “cushion” and allow for individuals to take riskier (but more financially-rewarding) decisions. Through a remarkable set of studies utilizing archival, correlational, experimental, and field data, they demonstrate that interventions aiming to increase community trust among impoverished individuals can decrease their present-biased decisions, ultimately allowing them to improve their financial situations.
The first study was an online experiment with participants from the US that aimed at exploring the relationship between community trust and temporal discounting — and if this differed between low- and high-income individuals. Indeed, the researchers found a main effect of both income and community trust: participants with lower incomes (<$40,000) discounted the future more, and individuals with higher levels of community trust discounted the future less. Interestingly, there was also an interaction between these two variables: lower levels of income were related to higher discounting of the future – but only when community trust was low. That is, low-income does not itself increase present bias. In the related second study, a real-world example of myopic decision making (payday loan use) was also found to be negatively associated with community trust.
The final two studies aimed at identifying a causal relationship between community trust and temporal discounting by low-income individuals in the lab and in the field. First, the researchers did an in-lab experiment that involved manipulating levels of felt income and felt community trust, by asking them questions that induced emotions related to each construct (“imagine scenarios with severe financial implications”; “list 10 examples from your own experience where community trust was justified”). As expected, individuals who were in the low-felt income, low-community trust condition had higher temporal discounting than those who were in the low-felt income, high community trust condition.
Finally, a field experiment was conducted in conjunction with an intervention to increase community trust in 121 union councils (a total of 1447 people) in rural Bangladesh. This 2-year intervention involved community volunteers who interacted with other members and helped residents access public services from the local government, as well as getting the residents involved in community-level decisions. About half of the union councils in the study received the intervention, and the other half were in the control condition. After two years, individuals in the areas that received the intervention did indeed have greater community trust than the control areas that did not, proving their intervention successful. Furthermore, individuals in the regions that received the intervention discounted the future less than their peers in the control regions (even when controlling for income), demonstrating the effectiveness of this intervention in reducing short-sighted decision making.
These results suggest that policies attempting to tackle the challenges of poverty should, instead of solely focusing on decreasing poverty on an individual level, shift some of that focus to the community level. As the article states, “The poor may lack in material wealth relative to the rich, but they possess social wealth in the shape of their communities upon which they can draw.” Policy-makers should utilize these findings to broaden their understanding of how poverty is perpetuated, and use the researchers’ successful intervention as a model for how to increase community trust in areas of low-income individuals.
References
Jachimowicz, J. M., Chafik, S., Munrat, S., Prabhu, J. C., & Weber, E. U. (2017). Community trust reduces myopic decisions of low-income individuals. Proceedings of the National Academy of Sciences, 114(21), 201617395. https://doi.org/10.1073/pnas.1617395114
Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty impedes cognitive function. Science, 341(6149), 976–980. https://doi.org/10.1126/science.1238041
Shah, A. K., Mullainathan, S., & Shafir, E. (2012). Some Consequences of Having Too Little. Science, 338(6107), 682–685. https://doi.org/10.1126/science.1222426
About the Author
Kruti Vekaria
Kruti Vekaria is currently a PhD candidate in Psychology at Georgetown University, concentrating in Lifespan Cognitive Neuroscience. She holds a Bachelor’s degree in Economics and Neuroscience from the University of Southern California. She is broadly interested in human decision making, and her research utilizes behavioral economics paradigms, social network tools, and fMRI neuroimaging to better understand social, health, and monetary choices.
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