1 00:00:00,000 --> 00:00:03,832 [SQUEAKING][RUSTLING][CLICKING] 2 00:00:09,485 --> 00:00:11,110 FRANK SCHILBACH: All right, so welcome. 3 00:00:11,110 --> 00:00:14,410 This is lecture 21 of 14.13. 4 00:00:14,410 --> 00:00:16,660 We're going to talk about poverty, as seen 5 00:00:16,660 --> 00:00:20,740 through the lens of psychology. 6 00:00:20,740 --> 00:00:21,910 What are we going to do? 7 00:00:21,910 --> 00:00:23,950 I'm going to give you some broad overview. 8 00:00:23,950 --> 00:00:27,820 We're going to particularly talk about this work on scarcity 9 00:00:27,820 --> 00:00:31,720 by Mani et al., which is the idea that thinking-- 10 00:00:31,720 --> 00:00:35,020 our thoughts about poverty captures people's minds, which 11 00:00:35,020 --> 00:00:38,020 in turn leaves less capacity in people's minds 12 00:00:38,020 --> 00:00:39,280 to do other things. 13 00:00:39,280 --> 00:00:41,200 And then we're going to talk a little bit 14 00:00:41,200 --> 00:00:46,270 at the end, at least briefly, about other deprivations 15 00:00:46,270 --> 00:00:48,900 that poverty entails. 16 00:00:48,900 --> 00:00:51,070 Some of this is what I have done. 17 00:00:51,070 --> 00:00:55,040 Some of this work by others. 18 00:00:55,040 --> 00:00:58,250 So I want to start with a simple observation that 19 00:00:58,250 --> 00:01:02,690 is sort of at the heart of a lot of this literature. 20 00:01:02,690 --> 00:01:06,932 And the observation is that when you look around in the world 21 00:01:06,932 --> 00:01:08,390 and look for evidence, and when you 22 00:01:08,390 --> 00:01:11,570 work on poverty-related issues, you'll 23 00:01:11,570 --> 00:01:16,700 see or observe quite a few seemingly suboptimal behaviors 24 00:01:16,700 --> 00:01:18,020 among the poor. 25 00:01:18,020 --> 00:01:22,160 This would be things like lack of investment or taking 26 00:01:22,160 --> 00:01:24,800 advantage of high return investment opportunities. 27 00:01:24,800 --> 00:01:27,470 This would be like investment in fertilizer or health 28 00:01:27,470 --> 00:01:33,560 investments or machines or low savings, 29 00:01:33,560 --> 00:01:36,020 in particular some things like precautionary savings, 30 00:01:36,020 --> 00:01:39,350 like being ready for shocks, saving for the future, 31 00:01:39,350 --> 00:01:41,460 for retirement, and so on. 32 00:01:41,460 --> 00:01:44,330 At the same time, sort of high return 33 00:01:44,330 --> 00:01:47,000 or high interest rate credit, people 34 00:01:47,000 --> 00:01:49,490 take very high interest loans. 35 00:01:49,490 --> 00:01:52,920 In part-- what I've shown you earlier in the class, 36 00:01:52,920 --> 00:01:55,460 that's particularly prevalent among the poor. 37 00:01:55,460 --> 00:01:59,990 There's some evidence of worse performance of parenting 38 00:01:59,990 --> 00:02:02,870 among poor parents, including things like violence 39 00:02:02,870 --> 00:02:05,810 against children and so on. 40 00:02:05,810 --> 00:02:11,630 There is some evidence of lower productivity, punctuality, 41 00:02:11,630 --> 00:02:15,410 lower medical adherence for drugs 42 00:02:15,410 --> 00:02:17,750 that are sort of even very high stakes drugs that 43 00:02:17,750 --> 00:02:19,430 are lifesaving. 44 00:02:19,430 --> 00:02:23,810 There's some evidence of food and drug consumptions 45 00:02:23,810 --> 00:02:30,950 in terms of healthy eating or excessive drug 46 00:02:30,950 --> 00:02:31,940 use and the like. 47 00:02:31,940 --> 00:02:35,510 All of those things tend to be correlated one way or the other 48 00:02:35,510 --> 00:02:39,890 with different forms of income or poverty. 49 00:02:39,890 --> 00:02:44,480 So now you might say, well that's interesting, but now 50 00:02:44,480 --> 00:02:46,780 what explains these behaviors? 51 00:02:46,780 --> 00:02:47,960 How do we think about this? 52 00:02:47,960 --> 00:02:50,510 What [AUDIO OUT] plausible explanation kinds 53 00:02:50,510 --> 00:02:53,000 of autocorrelations. 54 00:02:53,000 --> 00:02:56,920 To be very clear, these are correlations, not 55 00:02:56,920 --> 00:02:58,438 causal effects. 56 00:02:58,438 --> 00:03:00,730 So education could explain quite a few of those things. 57 00:03:00,730 --> 00:03:02,910 It could explain potentially productivity 58 00:03:02,910 --> 00:03:06,170 and it could explain potentially parenting 59 00:03:06,170 --> 00:03:10,690 and it could explain some form of financial investments. 60 00:03:10,690 --> 00:03:13,300 It could also explain things like medical insurance. 61 00:03:13,300 --> 00:03:20,060 For example, if you look at in some settings where 62 00:03:20,060 --> 00:03:24,110 people have not sort of learned in school 63 00:03:24,110 --> 00:03:27,277 any basics of medicine or biology and so on and sort of 64 00:03:27,277 --> 00:03:29,360 and it's not obvious that you should take medicine 65 00:03:29,360 --> 00:03:31,580 from a traditional doctor versus from some healer 66 00:03:31,580 --> 00:03:33,913 in the village, because how would you know what's better 67 00:03:33,913 --> 00:03:34,628 and what's worse. 68 00:03:34,628 --> 00:03:36,420 And sort of presumably some of these things 69 00:03:36,420 --> 00:03:38,820 you would learn in school. 70 00:03:38,820 --> 00:03:41,210 So one broad explanatory factor is 71 00:03:41,210 --> 00:03:43,330 sort of like, [INAUDIBLE] variables if you want, 72 00:03:43,330 --> 00:03:46,860 and one of them is potentially education. 73 00:03:46,860 --> 00:03:49,710 It's not about omitted variable. 74 00:03:49,710 --> 00:03:54,900 This is about a treatment effect of poverty itself. 75 00:03:54,900 --> 00:03:56,890 And I'm going to be more specific about that. 76 00:03:56,890 --> 00:04:00,615 But essentially it's something about being in poverty itself 77 00:04:00,615 --> 00:04:01,740 affects people's behaviors. 78 00:04:01,740 --> 00:04:04,047 So it causes them-- 79 00:04:04,047 --> 00:04:05,880 some of these outcomes, some of these things 80 00:04:05,880 --> 00:04:06,810 that we've seen here. 81 00:04:06,810 --> 00:04:09,480 We'll talk about that in detail, but that's exactly right. 82 00:04:09,480 --> 00:04:13,260 In some ways, people would say, even for-- 83 00:04:13,260 --> 00:04:15,520 if you take credit for example, or for some things, 84 00:04:15,520 --> 00:04:17,712 you probably can't explain. 85 00:04:17,712 --> 00:04:19,170 But for high return investment, you 86 00:04:19,170 --> 00:04:20,670 would say, while there's uncertainty 87 00:04:20,670 --> 00:04:22,620 and there's a good chance that there might be losses 88 00:04:22,620 --> 00:04:24,210 at the end of the day, and if you're 89 00:04:24,210 --> 00:04:27,210 really close to subsistence, you might not 90 00:04:27,210 --> 00:04:31,290 want to invest in stocks, because if a bad shock happens, 91 00:04:31,290 --> 00:04:33,055 that's really bad. 92 00:04:33,055 --> 00:04:34,430 So I think some of that is right. 93 00:04:34,430 --> 00:04:37,625 And punctuality, for example, could also 94 00:04:37,625 --> 00:04:38,750 be in some way uncertainty. 95 00:04:38,750 --> 00:04:40,820 It's like you try to take a bus to work 96 00:04:40,820 --> 00:04:42,570 and the bus just comes every hour, 97 00:04:42,570 --> 00:04:44,570 and then sometimes it comes a half an hour early 98 00:04:44,570 --> 00:04:45,778 and sometimes it comes later. 99 00:04:45,778 --> 00:04:48,110 And it's really hard to be actually punctual. 100 00:04:48,110 --> 00:04:50,840 Could just be some people are not productive 101 00:04:50,840 --> 00:04:52,460 and are just bad at doing stuff. 102 00:04:52,460 --> 00:04:55,340 And therefore, they become poor and then 103 00:04:55,340 --> 00:04:57,555 they end up being poor because of that. 104 00:04:57,555 --> 00:04:59,180 So that's essentially, I think, that we 105 00:04:59,180 --> 00:05:00,472 covered pretty much everything. 106 00:05:00,472 --> 00:05:03,170 So one is it could be sort of environmental conditions, which 107 00:05:03,170 --> 00:05:06,230 is transportation, it's really hard to get to work on time, 108 00:05:06,230 --> 00:05:07,970 or have the community for two hours 109 00:05:07,970 --> 00:05:10,730 and then you're really tired and that makes you less productive. 110 00:05:10,730 --> 00:05:12,440 Things like predatory lending sort 111 00:05:12,440 --> 00:05:14,630 of tricks you into lending. 112 00:05:14,630 --> 00:05:17,240 There could some some things about institutional structures, 113 00:05:17,240 --> 00:05:20,900 which is to say, I told you for example at MIT, 114 00:05:20,900 --> 00:05:23,510 there's a default-- 115 00:05:23,510 --> 00:05:25,340 or at other places, there's defaults 116 00:05:25,340 --> 00:05:26,690 for people to save money. 117 00:05:26,690 --> 00:05:28,880 And there's a default to get health insurance. 118 00:05:28,880 --> 00:05:31,550 And there's defaults for all sorts of good behaviors, 119 00:05:31,550 --> 00:05:36,470 like for vaccinations and so on and so forth. 120 00:05:36,470 --> 00:05:38,850 We are sort of essentially pushed by society, 121 00:05:38,850 --> 00:05:40,820 by the environmental conditions that we 122 00:05:40,820 --> 00:05:44,032 face into doing the right thing or whatever good behaviors, 123 00:05:44,032 --> 00:05:45,240 whatever you want to call it. 124 00:05:45,240 --> 00:05:48,650 And so the poor might just not have those things. 125 00:05:48,650 --> 00:05:50,210 So for example, having a bank account 126 00:05:50,210 --> 00:05:55,558 might be like if you paid daily or you can buy by trip. 127 00:05:55,558 --> 00:05:57,350 The rickshaw drivers that I was showing you 128 00:05:57,350 --> 00:05:59,900 earlier in the semester, they paid trip by trip 129 00:05:59,900 --> 00:06:02,960 and then they'd pass by the liquor stores, 130 00:06:02,960 --> 00:06:05,738 essentially daily, and have a bunch of cash on hand. 131 00:06:05,738 --> 00:06:08,280 Well, that's much trickier to sort of resist sometimes, since 132 00:06:08,280 --> 00:06:11,180 if you were particularly also prone to physical pain, 133 00:06:11,180 --> 00:06:13,790 and then sort of to use alcohol as a way 134 00:06:13,790 --> 00:06:15,650 to deal with your physical pain. 135 00:06:15,650 --> 00:06:18,950 As opposed to somebody who paid monthly and half of the money 136 00:06:18,950 --> 00:06:22,250 goes into the rent anyway and then other expenses and so on, 137 00:06:22,250 --> 00:06:23,993 which is much easier to manage. 138 00:06:23,993 --> 00:06:25,910 So that's kind of broadly I would summarize it 139 00:06:25,910 --> 00:06:28,500 as environmental conditions. 140 00:06:28,500 --> 00:06:31,170 Then there's selection and omitted variables, 141 00:06:31,170 --> 00:06:33,480 which is, I think Joseph has mentioned education, 142 00:06:33,480 --> 00:06:35,170 which is a very good one. 143 00:06:35,170 --> 00:06:37,790 There's things like intelligence, 144 00:06:37,790 --> 00:06:40,160 talent, effort, mistakes, and so on. 145 00:06:40,160 --> 00:06:43,850 You might say, well, if you are more prone-- if you're 146 00:06:43,850 --> 00:06:46,560 less productive, for example, if you're prone to making mistakes 147 00:06:46,560 --> 00:06:48,860 and so on, well that sort of leads 148 00:06:48,860 --> 00:06:52,610 to worse outcomes and that makes you end up being poor. 149 00:06:52,610 --> 00:06:57,530 And that's really sort of in some sense, a right wing 150 00:06:57,530 --> 00:06:59,665 kind of view, that people are-- 151 00:06:59,665 --> 00:07:01,290 they should do whatever they want to do 152 00:07:01,290 --> 00:07:04,380 and if the end of being poor, it's sort of their fault, 153 00:07:04,380 --> 00:07:05,030 and so on. 154 00:07:05,030 --> 00:07:07,430 That's of course not what we're going to argue here. 155 00:07:07,430 --> 00:07:08,600 What we're interested in-- or what 156 00:07:08,600 --> 00:07:11,225 I'm trying to argue [AUDIO OUT] show you some evidence off this 157 00:07:11,225 --> 00:07:15,770 that there's a treatment effect of poverty itself potentially. 158 00:07:15,770 --> 00:07:20,420 Which is to say that being poor itself causes these behaviors. 159 00:07:20,420 --> 00:07:24,240 And again, I'll show you the evidence in two ways. 160 00:07:24,240 --> 00:07:28,190 One is by inducing thoughts about money, 161 00:07:28,190 --> 00:07:31,220 essentially thinking about can you pay school fees, 162 00:07:31,220 --> 00:07:33,860 can pay your rent, can you get groceries for your children, 163 00:07:33,860 --> 00:07:36,360 are your children are going to be hungry tonight, and so on. 164 00:07:36,360 --> 00:07:38,120 These are all kind of thoughts that invade 165 00:07:38,120 --> 00:07:40,610 people's minds involuntarily. 166 00:07:40,610 --> 00:07:44,150 And by doing so, they capture people's attention. 167 00:07:44,150 --> 00:07:47,090 And then since attention overall is limited, 168 00:07:47,090 --> 00:07:50,660 people have less attention available for other things. 169 00:07:50,660 --> 00:07:55,120 That's sort of one broad theory. 170 00:07:55,120 --> 00:08:00,520 And I'll focus on that mostly which 171 00:08:00,520 --> 00:08:03,040 people refer to it under the name of scarcity. 172 00:08:03,040 --> 00:08:06,250 And then there's a bunch of other aspects of poverty 173 00:08:06,250 --> 00:08:08,950 as well that might be competing with people's 174 00:08:08,950 --> 00:08:12,370 cognitive function, their attention, that tire them out. 175 00:08:12,370 --> 00:08:16,840 They're just not sleeping well, be in pain, being exposed 176 00:08:16,840 --> 00:08:21,250 to pollution, environmental pollution, noise pollution, 177 00:08:21,250 --> 00:08:23,630 and so on, and so forth. 178 00:08:23,630 --> 00:08:27,045 And so now what's the underlying idea here? 179 00:08:27,045 --> 00:08:28,920 Well again, the underlying idea is that there 180 00:08:28,920 --> 00:08:31,240 might be what's called-- 181 00:08:31,240 --> 00:08:33,605 people might want to call it behavioral poverty trap. 182 00:08:33,605 --> 00:08:34,980 And the broad line of argument is 183 00:08:34,980 --> 00:08:37,679 that poverty affects people's cognition, decision making, 184 00:08:37,679 --> 00:08:38,909 or productivity. 185 00:08:38,909 --> 00:08:41,370 These factors in turn then influence 186 00:08:41,370 --> 00:08:45,180 people's future poverty, because if you're not productive 187 00:08:45,180 --> 00:08:46,680 and you can't save money and so on, 188 00:08:46,680 --> 00:08:49,020 you're going to be more poor in the future. 189 00:08:49,020 --> 00:08:50,640 And if those things are going on, 190 00:08:50,640 --> 00:08:54,330 there is essentially some form of a vicious cycle going on, 191 00:08:54,330 --> 00:08:57,490 which makes it difficult, if not impossible, 192 00:08:57,490 --> 00:08:59,370 for a person to become rich. 193 00:08:59,370 --> 00:09:02,428 Now notice at the very least, that will lower mobility. 194 00:09:02,428 --> 00:09:04,720 Sometimes if you're poor and you want to become richer, 195 00:09:04,720 --> 00:09:06,637 you have got to deal with a bunch of bad stuff 196 00:09:06,637 --> 00:09:10,260 that happens to you every day. 197 00:09:10,260 --> 00:09:13,340 But [INAUDIBLE] mobility is low, [INAUDIBLE] might be actually 198 00:09:13,340 --> 00:09:13,840 a trap. 199 00:09:13,840 --> 00:09:17,190 It's just next to or actually impossible to become richer, 200 00:09:17,190 --> 00:09:21,690 because all these forces are too strong to overcome for people. 201 00:09:21,690 --> 00:09:24,610 So today I'm going to talk about two broad lines of research. 202 00:09:24,610 --> 00:09:27,480 I'm going to focus mostly on the first one, which 203 00:09:27,480 --> 00:09:30,763 is monetary concerns capture people's cognitive function. 204 00:09:30,763 --> 00:09:33,180 I'm going to talk a little bit about other poverty-induced 205 00:09:33,180 --> 00:09:35,460 deprivation of behaviors which might have sort 206 00:09:35,460 --> 00:09:39,180 of similar effects overall. 207 00:09:39,180 --> 00:09:43,780 So now I want to do a simple test with you. 208 00:09:43,780 --> 00:09:47,970 So what I'd like you to do is to-- 209 00:09:47,970 --> 00:09:49,530 sorry, one second. 210 00:09:49,530 --> 00:09:52,750 I'm trying to-- give me a sec. 211 00:09:52,750 --> 00:09:54,418 I'd like you to-- 212 00:09:54,418 --> 00:09:55,210 hold on one second. 213 00:09:55,210 --> 00:09:56,224 One second. 214 00:09:59,900 --> 00:10:00,400 All right. 215 00:10:00,400 --> 00:10:00,710 Ready? 216 00:10:00,710 --> 00:10:01,850 Don't write anything down. 217 00:10:01,850 --> 00:10:05,660 Just try to remember it and then try to recall it in a bit. 218 00:10:05,660 --> 00:10:07,230 I'm going to start reading. 219 00:10:07,230 --> 00:10:17,880 Bed, rest, dream, doze, snore, slumber, blanket, snooze, wake, 220 00:10:17,880 --> 00:10:20,565 nap, awake, tired. 221 00:10:29,380 --> 00:10:32,950 OK, now please write down as many words as you remember. 222 00:11:08,853 --> 00:11:09,520 10 more seconds. 223 00:11:23,430 --> 00:11:24,830 All right, so done. 224 00:11:24,830 --> 00:11:27,948 So usually I would have people raise their hands, which 225 00:11:27,948 --> 00:11:28,740 is a little tricky. 226 00:11:28,740 --> 00:11:30,750 But I'm going to just read you the list of words 227 00:11:30,750 --> 00:11:31,708 and you can nod to me-- 228 00:11:31,708 --> 00:11:33,060 I can see some of you, at least. 229 00:11:33,060 --> 00:11:34,518 You can nod and tell me whether you 230 00:11:34,518 --> 00:11:40,082 remember the words that I read. 231 00:11:40,082 --> 00:11:41,040 OK, I'm going to start. 232 00:11:41,040 --> 00:11:47,160 Bed, rest-- pretty good-- 233 00:11:47,160 --> 00:11:57,460 dream, doze, snore-- no? 234 00:11:57,460 --> 00:12:15,700 Slumber, sleep, blanket, snooze, wake, nap, awake, tired. 235 00:12:19,010 --> 00:12:20,840 So I know this is making everybody sleepy 236 00:12:20,840 --> 00:12:22,420 and want to take a nap. 237 00:12:22,420 --> 00:12:23,350 Me, too. 238 00:12:23,350 --> 00:12:27,650 So here's the list of words that I asked you to remember. 239 00:12:27,650 --> 00:12:30,003 Now one thing that's kind of nice 240 00:12:30,003 --> 00:12:33,680 [INAUDIBLE] most people remembered quite a few things. 241 00:12:33,680 --> 00:12:35,180 The majority, for example, remembers 242 00:12:35,180 --> 00:12:37,320 bed and so on and so forth. 243 00:12:37,320 --> 00:12:40,100 Now what's quite interesting about these words is 244 00:12:40,100 --> 00:12:41,930 that while I remember-- 245 00:12:41,930 --> 00:12:43,550 I put all these names up here, which 246 00:12:43,550 --> 00:12:46,550 is-- these are the words that I actually read. 247 00:12:46,550 --> 00:12:48,830 Now one word that's actually missing in this list 248 00:12:48,830 --> 00:12:51,350 here is sleep. 249 00:12:51,350 --> 00:12:53,240 And so you sort of-- 250 00:12:53,240 --> 00:12:56,780 I snuck this in here on-- 251 00:12:56,780 --> 00:12:58,700 this is why I had to go back. 252 00:12:58,700 --> 00:13:00,920 It turns out I actually didn't read the word sleep, 253 00:13:00,920 --> 00:13:03,410 but quite a few of you were nodding happily 254 00:13:03,410 --> 00:13:05,090 when I asked you about sleep. 255 00:13:05,090 --> 00:13:09,960 And what's the reason why you remembered sleep? 256 00:13:09,960 --> 00:13:13,180 So all of these words is like-- 257 00:13:13,180 --> 00:13:15,640 they all around sleep. 258 00:13:15,640 --> 00:13:20,360 So it's really like sleep should have been there. 259 00:13:20,360 --> 00:13:21,860 It's kind of the type of thing where 260 00:13:21,860 --> 00:13:25,250 people would ask you, have you been to the parity last week, 261 00:13:25,250 --> 00:13:27,950 where people just assume-- where essentially all of the friends 262 00:13:27,950 --> 00:13:29,750 were there-- people just assume that you were there, 263 00:13:29,750 --> 00:13:31,610 as well, because you're supposed to be there. 264 00:13:31,610 --> 00:13:33,320 It's like sleep is supposed to be in this list, 265 00:13:33,320 --> 00:13:34,445 but we didn't put it there. 266 00:13:34,445 --> 00:13:36,800 And this is what is called false memory tests. 267 00:13:36,800 --> 00:13:39,258 And there's quite a bit of work on actually false memories. 268 00:13:39,258 --> 00:13:41,420 And people's minds essentially make up things. 269 00:13:41,420 --> 00:13:43,130 In particular, stuff that's sort of-- 270 00:13:43,130 --> 00:13:46,670 or where you have all situations that you think 271 00:13:46,670 --> 00:13:47,960 that should be the case. 272 00:13:47,960 --> 00:13:52,730 You can do the same with man and other lists and so on. 273 00:13:52,730 --> 00:13:56,330 And now psychologists have been doing studies 274 00:13:56,330 --> 00:13:57,710 for the rich and the poor. 275 00:13:57,710 --> 00:13:59,000 And so here's two lists. 276 00:13:59,000 --> 00:14:01,470 One is about sort of money-related stuff. 277 00:14:01,470 --> 00:14:05,660 And one is about sort of just anything that's related to, 278 00:14:05,660 --> 00:14:09,133 I guess, man or gender in some ways. 279 00:14:09,133 --> 00:14:10,550 And they looked at how many people 280 00:14:10,550 --> 00:14:12,160 have certain false memory. 281 00:14:12,160 --> 00:14:13,910 And what these studies show is essentially 282 00:14:13,910 --> 00:14:16,880 that when you take this list for a man 283 00:14:16,880 --> 00:14:21,590 and you do this with high income and low income people, 284 00:14:21,590 --> 00:14:27,890 the fraction who remember a man wrongly is about 15% to 20%. 285 00:14:27,890 --> 00:14:31,730 The fraction among the poor who remember money 286 00:14:31,730 --> 00:14:33,800 is similarly high. 287 00:14:33,800 --> 00:14:36,590 Among the rich, that's not the case. 288 00:14:36,590 --> 00:14:37,340 Now why is that? 289 00:14:37,340 --> 00:14:40,400 Well, it seems to be that for the poor, when you read lists 290 00:14:40,400 --> 00:14:42,890 like groceries, expense, bill, gas, et 291 00:14:42,890 --> 00:14:44,830 cetera, what they think about is essentially, 292 00:14:44,830 --> 00:14:46,080 how I'm going to pay for this. 293 00:14:46,080 --> 00:14:48,020 And they think about money. 294 00:14:48,020 --> 00:14:50,330 When for the rich, 295 00:14:50,330 --> 00:14:52,368 Instead, when you say groceries or whatever, 296 00:14:52,368 --> 00:14:54,410 they think about what I'm going to buy for dinner 297 00:14:54,410 --> 00:14:56,285 and what are the nice things I'm going to do. 298 00:14:56,285 --> 00:14:58,502 And for them, this is really not top of mind. 299 00:14:58,502 --> 00:15:00,710 So this is essentially at least one piece of evidence 300 00:15:00,710 --> 00:15:05,390 that money captures the minds of the poor moreso 301 00:15:05,390 --> 00:15:08,400 than for the rich. 302 00:15:08,400 --> 00:15:13,060 Now, a second study is a study about the doctor's visit. 303 00:15:13,060 --> 00:15:17,460 So this is a study where the participants were 304 00:15:17,460 --> 00:15:19,410 asked about the following situation, which 305 00:15:19,410 --> 00:15:22,260 is imagine that you have been feeling sick lately 306 00:15:22,260 --> 00:15:24,640 and finally decided to go see a doctor about it. 307 00:15:24,640 --> 00:15:27,090 The doctor explains that you have a serious condition that 308 00:15:27,090 --> 00:15:28,770 requires immediate attention. 309 00:15:28,770 --> 00:15:31,530 The good news, however, is you are virtually guaranteed 310 00:15:31,530 --> 00:15:32,940 to make a full recovery. 311 00:15:32,940 --> 00:15:34,710 The doctor writes several prescriptions. 312 00:15:34,710 --> 00:15:38,000 You will also need to make several appointments. 313 00:15:38,000 --> 00:15:41,040 What would be on your mind or how would you feel 314 00:15:41,040 --> 00:15:42,750 about when you hear this news? 315 00:15:42,750 --> 00:15:45,930 What are the three things that you think about it? 316 00:15:45,930 --> 00:15:47,813 Or you can think about for a second what 317 00:15:47,813 --> 00:15:49,980 is it that you would feel, and what are you thinking 318 00:15:49,980 --> 00:15:52,080 about when you see this. 319 00:15:52,080 --> 00:15:53,970 And what's particularly interesting 320 00:15:53,970 --> 00:15:56,890 is how when you look at people's responses 321 00:15:56,890 --> 00:16:01,440 some people say wife, son, co-worker. 322 00:16:01,440 --> 00:16:06,330 Some people are scared, afraid, worried, relief, hope, joy, 323 00:16:06,330 --> 00:16:11,850 so like emotions or just of relationships and other people. 324 00:16:11,850 --> 00:16:13,860 Not exactly sure what the co-workers doing there 325 00:16:13,860 --> 00:16:19,380 but anyway, but what's particularly interesting 326 00:16:19,380 --> 00:16:22,360 is the fraction of people who say costs. 327 00:16:22,360 --> 00:16:27,540 And as you can imagine, when you do this by low and high income 328 00:16:27,540 --> 00:16:34,050 when you think about medical conditions for the rich, 329 00:16:34,050 --> 00:16:37,470 this is much more about emotions about their health, 330 00:16:37,470 --> 00:16:40,810 about their relationships, their loved ones, and so on. 331 00:16:40,810 --> 00:16:44,310 And when the poor think about health or health expenditures 332 00:16:44,310 --> 00:16:46,350 or health issues, they think very much 333 00:16:46,350 --> 00:16:48,630 about health expenditures, and that is essentially 334 00:16:48,630 --> 00:16:51,070 what's top of mind for them. 335 00:16:51,070 --> 00:16:53,700 And so again, when you split the sample by low and high income 336 00:16:53,700 --> 00:16:58,080 people, the poor have much higher proportions of money 337 00:16:58,080 --> 00:17:01,890 really good thoughts as reported by these kinds of questions 338 00:17:01,890 --> 00:17:03,240 compared to the rich. 339 00:17:03,240 --> 00:17:06,651 The third study-- the last thing I'm going to show you 340 00:17:06,651 --> 00:17:08,109 is the study that I showed you very 341 00:17:08,109 --> 00:17:11,560 much at the beginning of the class, which was a study about 342 00:17:11,560 --> 00:17:14,990 imagine you are about to purchase an iPad for $500. 343 00:17:14,990 --> 00:17:18,670 The salesman says you can get the same iPad, exact same iPad 344 00:17:18,670 --> 00:17:20,260 for $15 off. 345 00:17:20,260 --> 00:17:23,800 Would you walk for 30 minutes in total for $15. 346 00:17:23,800 --> 00:17:25,273 Would you go for the other store? 347 00:17:25,273 --> 00:17:27,190 And similarly, you'd have to do the same thing 348 00:17:27,190 --> 00:17:28,760 for an iPad case. 349 00:17:28,760 --> 00:17:31,000 And so the result that we found in this class 350 00:17:31,000 --> 00:17:32,560 and like the other studies have found 351 00:17:32,560 --> 00:17:34,900 is that people are way more likely to report 352 00:17:34,900 --> 00:17:38,740 that they would walk for the iPad than for the iPad itself. 353 00:17:38,740 --> 00:17:41,320 And the explanation, of course, is 354 00:17:41,320 --> 00:17:45,340 that people evaluate things in relative terms, right. 355 00:17:45,340 --> 00:17:46,840 So if you think about the iPad case, 356 00:17:46,840 --> 00:17:49,870 $15 is really high relative to like 357 00:17:49,870 --> 00:17:54,700 $30 in the iPad cases of value, while for the iPad itself, 358 00:17:54,700 --> 00:17:58,960 $15 compared to $500 is not very much. 359 00:17:58,960 --> 00:18:01,420 Now that's some form of money illusion 360 00:18:01,420 --> 00:18:03,820 or some form of community confusion or the like, 361 00:18:03,820 --> 00:18:05,440 because at the end of the day you 362 00:18:05,440 --> 00:18:08,920 should just be willing to walk for 30 minutes for either $15 363 00:18:08,920 --> 00:18:09,610 or not. 364 00:18:09,610 --> 00:18:11,860 That's not going to change depending on whether you 365 00:18:11,860 --> 00:18:15,200 buy an iPad or an iPad case. 366 00:18:15,200 --> 00:18:17,740 Now many studies have found the kind of patterns 367 00:18:17,740 --> 00:18:21,130 including like in this class, but once you 368 00:18:21,130 --> 00:18:23,020 do that with the poor, they're much less 369 00:18:23,020 --> 00:18:26,400 likely if at all to engage in this kind of behavior, which 370 00:18:26,400 --> 00:18:28,380 seems to suggest that the poor, in fact, 371 00:18:28,380 --> 00:18:30,870 are less prone to this, kind of, labeling or, sort of, 372 00:18:30,870 --> 00:18:34,710 like monetary sort of comparisions. 373 00:18:34,710 --> 00:18:36,572 For them essentially $1 is $1 and they, 374 00:18:36,572 --> 00:18:38,030 sort of, understand that, like, $15 375 00:18:38,030 --> 00:18:42,660 is valuable regardless of what is surrounding comparisons 376 00:18:42,660 --> 00:18:43,857 like. 377 00:18:43,857 --> 00:18:45,940 And so if I have to summarize what I've just shown 378 00:18:45,940 --> 00:18:49,330 you very quickly is that thoughts about money 379 00:18:49,330 --> 00:18:53,530 tend to capture or take much more space in the poor's minds 380 00:18:53,530 --> 00:18:56,200 instead of the first two studies that I showed you, 381 00:18:56,200 --> 00:18:58,060 and second, the extra focus on money 382 00:18:58,060 --> 00:19:01,120 has actually some positive consequences in some sense. 383 00:19:01,120 --> 00:19:04,090 In some sense, you can say here this is an irrational decision 384 00:19:04,090 --> 00:19:07,840 to say, yes, that you will go for the iPad case 385 00:19:07,840 --> 00:19:12,230 compared to the iPad or some of this optimization going on. 386 00:19:12,230 --> 00:19:14,590 So the poor are actually doing better or the less prone 387 00:19:14,590 --> 00:19:18,280 to these kinds of errors compared to the rich. 388 00:19:18,280 --> 00:19:20,440 I think that's a good thing for like potentially 389 00:19:20,440 --> 00:19:24,020 better monetary decisions here. 390 00:19:24,020 --> 00:19:26,330 So there's some positive consequences 391 00:19:26,330 --> 00:19:29,680 for impacts based on that. 392 00:19:29,680 --> 00:19:32,440 now, and this is where we're going to go, is, 393 00:19:32,440 --> 00:19:35,050 well, are there also some negative effects potentially? 394 00:19:35,050 --> 00:19:37,930 The reason being that if you have a certain amount 395 00:19:37,930 --> 00:19:40,600 of attention available overall, or cognitive resources 396 00:19:40,600 --> 00:19:43,240 available, if your brain is taken up 397 00:19:43,240 --> 00:19:47,680 by essentially these thoughts about money, 398 00:19:47,680 --> 00:19:50,380 then there will be less available resources 399 00:19:50,380 --> 00:19:53,310 for other stuff. 400 00:19:53,310 --> 00:19:55,398 Any questions on this so far? 401 00:20:04,860 --> 00:20:10,240 OK, so then let's talk about the scarcity work specifically. 402 00:20:10,240 --> 00:20:13,050 So scarcity is actually defined generally here 403 00:20:13,050 --> 00:20:15,660 as not having enough of something. 404 00:20:15,660 --> 00:20:19,150 This could be money, friends, hair, time, et cetera. 405 00:20:19,150 --> 00:20:21,420 It's very general, actually. 406 00:20:21,420 --> 00:20:23,010 And so the idea is just like if you 407 00:20:23,010 --> 00:20:25,280 have something that you think you don't have enough. 408 00:20:25,280 --> 00:20:27,780 Notice that the definition is pretty vague in the sense that 409 00:20:27,780 --> 00:20:30,773 like it's not just saying like having low income, 410 00:20:30,773 --> 00:20:32,190 but it's sort of thinking that you 411 00:20:32,190 --> 00:20:34,080 don't have enough income, which could be also 412 00:20:34,080 --> 00:20:36,290 like in relative terms and so on. 413 00:20:36,290 --> 00:20:40,160 And then the hypothesis is that scarcity captured 414 00:20:40,160 --> 00:20:43,670 people's mental cognitive capacity, their bandwidth, 415 00:20:43,670 --> 00:20:44,960 as they call it. 416 00:20:44,960 --> 00:20:47,645 This happens automatically and not intentionally. 417 00:20:47,645 --> 00:20:49,520 That is to say, that it's not people choosing 418 00:20:49,520 --> 00:20:52,860 to spend a lot of time on thinking about money, 419 00:20:52,860 --> 00:20:55,920 but rather, money captures their minds, 420 00:20:55,920 --> 00:20:59,383 and then they have trouble thinking about other things. 421 00:20:59,383 --> 00:21:00,800 Think about this as like, it would 422 00:21:00,800 --> 00:21:03,710 be like suppose you have like some fights 423 00:21:03,710 --> 00:21:06,440 with a good friend of yours, or a partner or the like, 424 00:21:06,440 --> 00:21:09,120 and then you have an important job interview. 425 00:21:09,120 --> 00:21:10,730 It's really not productive to think 426 00:21:10,730 --> 00:21:16,280 about the fight with your friend or family member 427 00:21:16,280 --> 00:21:17,545 or partner or the like. 428 00:21:17,545 --> 00:21:18,920 During the job interview, there's 429 00:21:18,920 --> 00:21:20,520 nothing productive about doing that. 430 00:21:20,520 --> 00:21:22,145 You should be focusing on the interview 431 00:21:22,145 --> 00:21:23,220 and try to do your best. 432 00:21:23,220 --> 00:21:25,520 But it might be that like essentially, these thoughts 433 00:21:25,520 --> 00:21:27,560 invade your minds and you sort of get really 434 00:21:27,560 --> 00:21:29,810 distracted unintentionally, and then 435 00:21:29,810 --> 00:21:32,030 do worse in those kinds of-- 436 00:21:32,030 --> 00:21:34,460 And that's the idea here similarly here 437 00:21:34,460 --> 00:21:38,500 as well, which is that essentially, there 438 00:21:38,500 --> 00:21:41,690 might be some benefit of figuring out monetary problems 439 00:21:41,690 --> 00:21:44,250 and figuring out how to pay the bills and so on and so forth. 440 00:21:44,250 --> 00:21:47,630 But overall, these benefits might 441 00:21:47,630 --> 00:21:53,030 be overwhelmed by taking over people's brain 442 00:21:53,030 --> 00:21:59,010 that leaves less resources for other things, the decisions 443 00:21:59,010 --> 00:22:02,800 or productivity that people have to do in life. 444 00:22:02,800 --> 00:22:05,950 And so in particular, poverty now, so this 445 00:22:05,950 --> 00:22:07,420 is a general introduction. 446 00:22:07,420 --> 00:22:10,840 Poverty specifically makes monetary concerns top of mind, 447 00:22:10,840 --> 00:22:13,690 so the poor might be acting more rational in some ways, 448 00:22:13,690 --> 00:22:15,880 in some sense, in financial choices, which 449 00:22:15,880 --> 00:22:18,100 is kind of what the evidence that I just showed you 450 00:22:18,100 --> 00:22:21,230 in there, several studies that try to make that point. 451 00:22:21,230 --> 00:22:25,030 But you know, scarcity might then deteriorate performance 452 00:22:25,030 --> 00:22:27,480 at other cognitive tasks. 453 00:22:27,480 --> 00:22:30,285 Now, here's sort of a PowerPoint version of that, 454 00:22:30,285 --> 00:22:31,660 which, you know, people may think 455 00:22:31,660 --> 00:22:32,743 about many things in life. 456 00:22:32,743 --> 00:22:34,270 They might think about rent. 457 00:22:34,270 --> 00:22:36,610 They might think about the kids doing well, 458 00:22:36,610 --> 00:22:41,977 eating healthy, utilities, car payments, and so on. 459 00:22:41,977 --> 00:22:43,060 But what does scarcity do? 460 00:22:43,060 --> 00:22:44,830 It magnifies, essentially, people's 461 00:22:44,830 --> 00:22:47,410 thoughts about rent, car payments and utility bills. 462 00:22:47,410 --> 00:22:50,350 These are all monetary things that people think about a lot, 463 00:22:50,350 --> 00:22:53,380 and thn it might sort of like drown out or like force 464 00:22:53,380 --> 00:22:56,380 out other thoughts about other things, about eating healthy 465 00:22:56,380 --> 00:22:59,890 or about taking care of the kids in other ways 466 00:22:59,890 --> 00:23:02,680 than paying the bills, OK. 467 00:23:02,680 --> 00:23:04,690 And so now, I'm going to show you 468 00:23:04,690 --> 00:23:07,260 evidence of two studies that sort of support this point. 469 00:23:07,260 --> 00:23:09,668 The first one, the paper is called 470 00:23:09,668 --> 00:23:11,210 "Poverty impedes cognitive function." 471 00:23:11,210 --> 00:23:12,860 That was the reading for today. 472 00:23:12,860 --> 00:23:14,907 The first one is called the mall study. 473 00:23:14,907 --> 00:23:16,240 So what does this mall study do? 474 00:23:16,240 --> 00:23:18,850 It's kind of like a lab experiment, 475 00:23:18,850 --> 00:23:21,700 but it's sort of in some sense like a field experiment. 476 00:23:21,700 --> 00:23:27,850 So it's a major Jersey mall that asks shoppers or stops shoppers 477 00:23:27,850 --> 00:23:31,240 with a median household income of roughly $70,000, 478 00:23:31,240 --> 00:23:35,110 so sort of richer than the average American, 479 00:23:35,110 --> 00:23:39,010 but with quite a bit of range of income overall. 480 00:23:39,010 --> 00:23:42,520 So there's like very rich people and fairly poor people. 481 00:23:42,520 --> 00:23:45,910 And then there's a sequence of three events, essentially, 482 00:23:45,910 --> 00:23:48,820 which is, people are asked hypothetical questions 483 00:23:48,820 --> 00:23:50,230 involving money. 484 00:23:50,230 --> 00:23:52,330 Some are hard and some are easy. 485 00:23:52,330 --> 00:23:54,670 And then people are asked to do cognitive tests, 486 00:23:54,670 --> 00:23:57,940 a non-verbal test that sort of measures people's 487 00:23:57,940 --> 00:24:00,340 fluid intelligence, which is Raven's Matrices, which 488 00:24:00,340 --> 00:24:01,765 you might be familiar with. 489 00:24:01,765 --> 00:24:03,730 They're sort of IQ type tests. 490 00:24:03,730 --> 00:24:05,440 And some form of cognitive control, 491 00:24:05,440 --> 00:24:06,940 which essentially is about like, are 492 00:24:06,940 --> 00:24:14,350 you able to overwrite automatic responses when 493 00:24:14,350 --> 00:24:15,970 doing cognitive tasks. 494 00:24:15,970 --> 00:24:19,180 And then number three, then, is like people that answer 495 00:24:19,180 --> 00:24:20,540 the hypothetical questions. 496 00:24:20,540 --> 00:24:21,850 So what does this look like? 497 00:24:21,850 --> 00:24:23,950 A hypothetical question is involving 498 00:24:23,950 --> 00:24:25,960 money, which is the following. 499 00:24:25,960 --> 00:24:28,810 Your car is having some trouble and requires x dollars 500 00:24:28,810 --> 00:24:29,770 to be fixed. 501 00:24:29,770 --> 00:24:32,710 You can pay in full, take a loan or take a chance 502 00:24:32,710 --> 00:24:34,880 and forgo the service at the moment. 503 00:24:34,880 --> 00:24:37,525 How would you go about making this decision? 504 00:24:37,525 --> 00:24:39,650 And so then, people ask this question and they say, 505 00:24:39,650 --> 00:24:41,442 well, you can think about this for a while. 506 00:24:41,442 --> 00:24:43,420 And afterwards, I'm going to ask you 507 00:24:43,420 --> 00:24:45,430 about the answer to that question. 508 00:24:45,430 --> 00:24:49,570 And then there's a hard version and an easy version. 509 00:24:49,570 --> 00:24:53,470 The idea is that the experiment wants to keep everything 510 00:24:53,470 --> 00:24:56,680 the same for like across treatments, 511 00:24:56,680 --> 00:25:00,460 and the idea is that $150 for the average American 512 00:25:00,460 --> 00:25:02,050 is not that much money, so it's not 513 00:25:02,050 --> 00:25:04,030 going to be a huge problem for most people, 514 00:25:04,030 --> 00:25:06,250 at least in normal times of their lives. 515 00:25:06,250 --> 00:25:09,670 But $1,500 is actually a lot of money for like a low income 516 00:25:09,670 --> 00:25:11,770 person in the US, but perhaps not 517 00:25:11,770 --> 00:25:14,530 that big of a deal for a rich person. 518 00:25:14,530 --> 00:25:17,152 Like for a rich person, the $1,500 or $150 are both fine. 519 00:25:17,152 --> 00:25:19,360 They're going to have some money in the bank account, 520 00:25:19,360 --> 00:25:21,110 and they're going to deal with it somehow. 521 00:25:21,110 --> 00:25:22,150 It's not a huge issue. 522 00:25:22,150 --> 00:25:27,580 For the poor person, $150 is not great, but not a huge problem 523 00:25:27,580 --> 00:25:28,750 or not a huge headache. 524 00:25:28,750 --> 00:25:31,120 But $1,500 surely is really bad. 525 00:25:31,120 --> 00:25:34,510 That's sort of the idea here, right. 526 00:25:34,510 --> 00:25:38,435 Now what the study that finds is that-- and let 527 00:25:38,435 --> 00:25:39,810 me walk you through these graphs. 528 00:25:39,810 --> 00:25:41,580 Let's look on the left side. 529 00:25:41,580 --> 00:25:43,650 On the right side is quite similar. 530 00:25:43,650 --> 00:25:46,950 You'll see here always four bars. 531 00:25:46,950 --> 00:25:52,440 The dark bars are how people are doing after the hard task, 532 00:25:52,440 --> 00:25:56,760 and the lighter bars after the easy task. 533 00:25:56,760 --> 00:25:59,940 Let's start with the light gray bars, 534 00:25:59,940 --> 00:26:01,703 comparing the poor versus the rich. 535 00:26:01,703 --> 00:26:03,370 And what you essentially see is the poor 536 00:26:03,370 --> 00:26:05,730 and the rich are doing pretty much the same 537 00:26:05,730 --> 00:26:08,563 after doing the easy task. 538 00:26:08,563 --> 00:26:10,230 But to be clear, what's poor versus rich 539 00:26:10,230 --> 00:26:13,150 is essentially being split by the median income. 540 00:26:13,150 --> 00:26:15,773 So if you're above the median, you're called rich. 541 00:26:15,773 --> 00:26:17,190 If you're below the median, you're 542 00:26:17,190 --> 00:26:19,830 called poor for the purpose of this study. 543 00:26:19,830 --> 00:26:24,460 Now, for the easy task here, this 544 00:26:24,460 --> 00:26:27,220 is like the rich do essentially as well or as badly 545 00:26:27,220 --> 00:26:28,330 as the poor do. 546 00:26:28,330 --> 00:26:35,200 They get about 40% correct in these Raven's puzzles, 547 00:26:35,200 --> 00:26:37,070 and the poor do essentially the same. 548 00:26:37,070 --> 00:26:39,640 So there's no difference after the easy task. 549 00:26:39,640 --> 00:26:41,530 Now, after the hard task, for the rich, 550 00:26:41,530 --> 00:26:42,040 essentially it's the same. 551 00:26:42,040 --> 00:26:43,750 If anything, they do a little bit better. 552 00:26:43,750 --> 00:26:46,930 The difference is not statistically significant. 553 00:26:46,930 --> 00:26:51,160 In contrast, you see like a clear drop in performance 554 00:26:51,160 --> 00:26:52,500 among the poor, OK. 555 00:26:52,500 --> 00:26:56,050 They do about like 12 percentage points worse. 556 00:26:56,050 --> 00:27:00,830 This is really like a huge difference in how well people-- 557 00:27:00,830 --> 00:27:02,320 so this is for Raven's Matrices. 558 00:27:02,320 --> 00:27:04,420 This is for what's called hearts and flowers 559 00:27:04,420 --> 00:27:06,460 for cognitive control, which is essentially 560 00:27:06,460 --> 00:27:10,590 how good are people at controlling their attention 561 00:27:10,590 --> 00:27:11,377 or resources. 562 00:27:11,377 --> 00:27:13,210 And what you see is essentially more or less 563 00:27:13,210 --> 00:27:15,860 the same pattern, that for the easy task, 564 00:27:15,860 --> 00:27:18,740 the rich and the poor do pretty much the same. 565 00:27:18,740 --> 00:27:20,530 The hard task compared to the easy task 566 00:27:20,530 --> 00:27:21,760 does nothing for the rich. 567 00:27:21,760 --> 00:27:23,440 This is actually, the performance 568 00:27:23,440 --> 00:27:25,210 is the same or slightly different 569 00:27:25,210 --> 00:27:27,610 but not statistically significantly so. 570 00:27:27,610 --> 00:27:30,490 For the poor, there is a large drop in performance 571 00:27:30,490 --> 00:27:32,450 compared to the rich. 572 00:27:32,450 --> 00:27:33,590 Any questions on that? 573 00:27:40,990 --> 00:27:45,790 OK, So then I'm going to show you the second study that's 574 00:27:45,790 --> 00:27:46,742 related to this. 575 00:27:46,742 --> 00:27:48,200 So one thing you might sort of say, 576 00:27:48,200 --> 00:27:51,780 well, we're going to show you, already, a study, so why 577 00:27:51,780 --> 00:27:53,890 do we need another study when we already did one. 578 00:27:53,890 --> 00:27:56,710 We showed you that like poverty and thinking about poverty 579 00:27:56,710 --> 00:28:02,770 affects people's cognition, so why do we need more evidence. . 580 00:28:02,770 --> 00:28:05,600 So effort is an interesting issue that-- 581 00:28:05,600 --> 00:28:08,080 so there's, in fact, this study has-- 582 00:28:08,080 --> 00:28:10,960 and I took this out of the slides because I had too many. 583 00:28:10,960 --> 00:28:13,180 There's an incentivized version of this task. 584 00:28:13,180 --> 00:28:15,130 And the authors do find that, even 585 00:28:15,130 --> 00:28:18,670 once you incentivize these tasks, 586 00:28:18,670 --> 00:28:20,320 we find the same patterns. 587 00:28:20,320 --> 00:28:24,050 But even there, it's a bit sort of like a task that 588 00:28:24,050 --> 00:28:26,360 is not a task that people do in their real life. 589 00:28:26,360 --> 00:28:29,720 And in a way, which is actually not what the harvest study is 590 00:28:29,720 --> 00:28:33,950 addressing, you might wonder. 591 00:28:33,950 --> 00:28:37,040 Does this translate into real world choices and decisions 592 00:28:37,040 --> 00:28:40,340 that actually have consequence for people's behaviors? 593 00:28:40,340 --> 00:28:42,680 To be clear, these effects here, these differences 594 00:28:42,680 --> 00:28:44,487 in cognitive performances, are very large. 595 00:28:44,487 --> 00:28:46,820 This is like the order of magnitude something like 10 IQ 596 00:28:46,820 --> 00:28:49,220 points, which is really huge. 597 00:28:49,220 --> 00:28:52,340 So you might sort of argue that we think that IQ, et cetera, 598 00:28:52,340 --> 00:28:53,400 matters a lot. 599 00:28:53,400 --> 00:28:57,240 So in some sense, that's what Mullainathan and Shafir 600 00:28:57,240 --> 00:28:57,897 would argue. 601 00:28:57,897 --> 00:28:58,980 But, no, I agree with you. 602 00:28:58,980 --> 00:29:00,855 In some sense, we would like to see does this 603 00:29:00,855 --> 00:29:03,330 translate into real world choices 604 00:29:03,330 --> 00:29:10,850 that we see in people's everyday lives. 605 00:29:10,850 --> 00:29:13,630 Now, I think we talked about a few of those things. 606 00:29:13,630 --> 00:29:15,590 So one is external validity concerns, 607 00:29:15,590 --> 00:29:19,400 which is to say, look, we did this study in the mall, which 608 00:29:19,400 --> 00:29:21,380 is a little bit of a funny thing to do. 609 00:29:21,380 --> 00:29:23,980 And you hear about the scenario, which is kind of weird 610 00:29:23,980 --> 00:29:25,130 and maybe tricks you out. 611 00:29:25,130 --> 00:29:26,755 And maybe the poor are more freaked out 612 00:29:26,755 --> 00:29:28,760 than the rich for some reason. 613 00:29:28,760 --> 00:29:32,060 But really, if you think about paying back 614 00:29:32,060 --> 00:29:36,410 your debt or any sort of school fees or just not having money, 615 00:29:36,410 --> 00:29:38,510 that's a repeated exposure of something 616 00:29:38,510 --> 00:29:39,873 that know in your real life. 617 00:29:39,873 --> 00:29:41,790 For example, not having harvest versus harvest 618 00:29:41,790 --> 00:29:46,650 is a thing that you experience every year or every twice 619 00:29:46,650 --> 00:29:47,398 a year even. 620 00:29:47,398 --> 00:29:48,940 And so you think some of these things 621 00:29:48,940 --> 00:29:51,520 might sort of go away with repeat exposure. 622 00:29:51,520 --> 00:29:54,360 And so we kind of would like to have a real world setting where 623 00:29:54,360 --> 00:29:57,540 we have actually real world natural variation 624 00:29:57,540 --> 00:30:00,270 or sort of experimental variation potentially as 625 00:30:00,270 --> 00:30:04,320 opposed to the somewhat weird feature in some mall somebody 626 00:30:04,320 --> 00:30:07,740 talks you up and asks you some questions, which people might 627 00:30:07,740 --> 00:30:10,590 find funny and might not be representative for what people 628 00:30:10,590 --> 00:30:12,330 do with their lives. 629 00:30:12,330 --> 00:30:14,080 And then the second part is kind of how do 630 00:30:14,080 --> 00:30:15,930 we interpret magnitudes, right? 631 00:30:15,930 --> 00:30:21,100 So I showed up and said, look, these effects are really large. 632 00:30:21,100 --> 00:30:23,860 After the hard task, the poor do worse than the rich. 633 00:30:23,860 --> 00:30:25,570 But we have no idea how we should 634 00:30:25,570 --> 00:30:28,960 scale this in terms of what does it actually mean 635 00:30:28,960 --> 00:30:32,020 for actual effects of poverty. 636 00:30:32,020 --> 00:30:35,090 Suppose I give somebody $1,000 or $10,000, 637 00:30:35,090 --> 00:30:37,220 what does it do to people's performance? 638 00:30:37,220 --> 00:30:38,890 It essentially, what this shows, is 639 00:30:38,890 --> 00:30:40,840 that the poor are more sort of frazzled 640 00:30:40,840 --> 00:30:42,155 by these financial questions. 641 00:30:42,155 --> 00:30:43,780 But it gives you essentially-- and that 642 00:30:43,780 --> 00:30:45,697 seems to be important because the magnitude is 643 00:30:45,697 --> 00:30:46,977 large and these effects. 644 00:30:46,977 --> 00:30:49,060 But there's no way to actually scale these effects 645 00:30:49,060 --> 00:30:51,970 in some sense in thinking about what is this priming 646 00:30:51,970 --> 00:30:54,700 intervention actually correspond to in the real world in terms 647 00:30:54,700 --> 00:30:57,203 of dollars and how rich or poor people are. 648 00:30:57,203 --> 00:30:58,870 So that's another sort of reason why you 649 00:30:58,870 --> 00:31:02,320 might want to do another study. 650 00:31:02,320 --> 00:31:02,920 OK. 651 00:31:02,920 --> 00:31:04,570 So what is the other study? 652 00:31:04,570 --> 00:31:06,240 As Lauren was already saying, it's 653 00:31:06,240 --> 00:31:09,490 a study with 464 sugarcane farmers 654 00:31:09,490 --> 00:31:12,460 in 54 villages in Tamil Nadu. 655 00:31:12,460 --> 00:31:14,080 These are small scale farmers that 656 00:31:14,080 --> 00:31:19,000 earn at least the majority of 60% of income from sugarcane. 657 00:31:19,000 --> 00:31:21,940 So these are mostly sugarcane farmers. 658 00:31:21,940 --> 00:31:25,360 And crucially for the study, the harvest 659 00:31:25,360 --> 00:31:27,220 is staggered over a three to five 660 00:31:27,220 --> 00:31:30,280 month period set by the sugar mills due to capacity 661 00:31:30,280 --> 00:31:31,250 constraints. 662 00:31:31,250 --> 00:31:34,742 So it's not some people harvest earlier than others 663 00:31:34,742 --> 00:31:36,700 because they decide to do so maybe because they 664 00:31:36,700 --> 00:31:38,020 need more cash. 665 00:31:38,020 --> 00:31:40,240 But it's rather because of capacity constraints. 666 00:31:40,240 --> 00:31:45,850 The sugar mill is essentially deciding who to harvests early 667 00:31:45,850 --> 00:31:47,440 and who harvests late. 668 00:31:47,440 --> 00:31:49,210 And so, now, what this study explored 669 00:31:49,210 --> 00:31:54,190 is that the sugarcane harvest cycle takes about 18 months. 670 00:31:54,190 --> 00:31:55,870 It's extremely long. 671 00:31:55,870 --> 00:32:03,220 And as a result, farmers tend to be relatively poor pre-harvest. 672 00:32:03,220 --> 00:32:07,840 Think of that this is like grad school and undergrad stipends. 673 00:32:07,840 --> 00:32:09,460 If you have that money for the month 674 00:32:09,460 --> 00:32:12,580 or the semester or the like, the beginning of the semester 675 00:32:12,580 --> 00:32:14,040 is always amazing-- 676 00:32:14,040 --> 00:32:16,093 or month, for that matter, is always amazing. 677 00:32:16,093 --> 00:32:17,010 You have lots of cash. 678 00:32:17,010 --> 00:32:19,270 And you can do lots of nice things. 679 00:32:19,270 --> 00:32:22,990 And then towards the end of the month or semester, 680 00:32:22,990 --> 00:32:26,290 people tend to run out of cash, at least 681 00:32:26,290 --> 00:32:30,920 when I was a grad student or student in general. 682 00:32:30,920 --> 00:32:33,740 Similar things are true for food stamps 683 00:32:33,740 --> 00:32:35,158 or other sort of cash programs. 684 00:32:35,158 --> 00:32:36,950 There's quite a bit of evidence that shows, 685 00:32:36,950 --> 00:32:38,492 at the beginning of the month, people 686 00:32:38,492 --> 00:32:41,060 are doing a lot better than at the end, which 687 00:32:41,060 --> 00:32:44,450 seems to suggest that people have trouble smoothing 688 00:32:44,450 --> 00:32:47,960 their income over time, which presumably 689 00:32:47,960 --> 00:32:51,380 has to do with some form of self-control or other problems. 690 00:32:51,380 --> 00:32:53,210 But so for the purpose of this study, 691 00:32:53,210 --> 00:32:55,910 farmers are relatively poor pre-harvest. 692 00:32:55,910 --> 00:32:58,160 And that now allows the authors to look 693 00:32:58,160 --> 00:33:00,740 at within person comparisons of people, 694 00:33:00,740 --> 00:33:03,800 sometimes when they're poor and sometimes when they're rich, 695 00:33:03,800 --> 00:33:06,470 at looking at the cognitive performance, 696 00:33:06,470 --> 00:33:09,920 by looking at people pre and post harvest. 697 00:33:09,920 --> 00:33:12,775 Now, first, you want to kind of see some evidence 698 00:33:12,775 --> 00:33:14,650 that farmers' financial situation is actually 699 00:33:14,650 --> 00:33:16,180 worse pre-harvest. 700 00:33:16,180 --> 00:33:18,280 And so there's quite a few-- 701 00:33:18,280 --> 00:33:21,220 and you can focus on the first column here-- 702 00:33:21,220 --> 00:33:22,600 pieces of evidence. 703 00:33:22,600 --> 00:33:25,920 People are more likely to have their belongings pawned. 704 00:33:25,920 --> 00:33:29,350 They're more likely to have loans outstanding. 705 00:33:29,350 --> 00:33:32,020 They also have more loans outstanding. 706 00:33:32,020 --> 00:33:37,120 They're also more likely to say yes to the question or higher 707 00:33:37,120 --> 00:33:40,750 scores to the question about their ability 708 00:33:40,750 --> 00:33:49,120 to cope with ordinary bills in the past 15 days post-harvest. 709 00:33:49,120 --> 00:33:51,580 And so all of these things sort of are saying, essentially, 710 00:33:51,580 --> 00:33:55,642 before harvest, farmers are in a financially tricky situation. 711 00:33:55,642 --> 00:33:57,850 And after harvest, that gets better because they get, 712 00:33:57,850 --> 00:33:59,950 essentially, a bunch of cash from this harvest. 713 00:33:59,950 --> 00:34:01,600 Because, essentially, it's a cash crop. 714 00:34:01,600 --> 00:34:04,017 You sell your sugarcane, and then you get a bunch of money 715 00:34:04,017 --> 00:34:07,170 that you can use over the next 18 months. 716 00:34:07,170 --> 00:34:11,190 Now, then the authors find, again, using Raven's matrices 717 00:34:11,190 --> 00:34:13,050 and some measures of cognitive control, 718 00:34:13,050 --> 00:34:16,409 that people are doing a lot worse pre-harvest compared 719 00:34:16,409 --> 00:34:17,550 to post-harvest. 720 00:34:17,550 --> 00:34:20,580 In terms of Raven's matrices, this is accurate. 721 00:34:20,580 --> 00:34:22,560 Essentially, people do better than getting 722 00:34:22,560 --> 00:34:28,050 more Raven's matrices correct compared to the control group. 723 00:34:28,050 --> 00:34:31,380 They also are doing better in terms of cognitive control. 724 00:34:31,380 --> 00:34:33,460 Post-harvest response times go down, 725 00:34:33,460 --> 00:34:34,770 which is a good thing here. 726 00:34:34,770 --> 00:34:38,350 And post-harvest, also, people's errors 727 00:34:38,350 --> 00:34:39,550 go down in these measures. 728 00:34:39,550 --> 00:34:41,480 And there's a lot of detail related to that. 729 00:34:41,480 --> 00:34:45,600 But in some sense, that doesn't matter much for you right now. 730 00:34:45,600 --> 00:34:48,120 People, essentially, are doing better post-harvest 731 00:34:48,120 --> 00:34:51,150 when they have more cash. 732 00:34:51,150 --> 00:34:54,770 Now, what confounds can you think about? 733 00:34:54,770 --> 00:34:57,060 What are potential problems with this result? 734 00:35:01,060 --> 00:35:04,250 Actually, this is consistent with poverty 735 00:35:04,250 --> 00:35:05,838 impeding cognitive function, but there 736 00:35:05,838 --> 00:35:07,130 could be other things going on. 737 00:35:07,130 --> 00:35:09,710 And what are these other things? 738 00:35:09,710 --> 00:35:12,140 I think there's some good evidence-- 739 00:35:12,140 --> 00:35:15,380 or one good thing is that it would 740 00:35:15,380 --> 00:35:18,410 have to be a very specific shock that has to do with harvest. 741 00:35:18,410 --> 00:35:21,080 Because, essentially, the harvest period 742 00:35:21,080 --> 00:35:23,250 was staggered over several months. 743 00:35:23,250 --> 00:35:25,850 So it's not like, at some point, the weather 744 00:35:25,850 --> 00:35:27,410 got worse or the weather got better. 745 00:35:27,410 --> 00:35:29,810 Because some people actually harvest earlier than others, 746 00:35:29,810 --> 00:35:31,260 and there's a pre-post comparison. 747 00:35:31,260 --> 00:35:33,860 But there could be other stuff, time trends or something, 748 00:35:33,860 --> 00:35:36,630 going on at least in some ways. 749 00:35:36,630 --> 00:35:39,892 In a way, I think a confound or, in a way, 750 00:35:39,892 --> 00:35:41,600 it's also just a different interpretation 751 00:35:41,600 --> 00:35:44,090 perhaps in some ways in the sense of saying, 752 00:35:44,090 --> 00:35:47,550 well, it's not just worries about the level of income. 753 00:35:47,550 --> 00:35:51,090 But it's also worries about, essentially, risk or anxiety, 754 00:35:51,090 --> 00:35:51,590 essentially. 755 00:35:51,590 --> 00:35:52,965 And so that's slightly different, 756 00:35:52,965 --> 00:35:55,190 but the anxiety could also sort of capture 757 00:35:55,190 --> 00:35:58,440 people's minds in some ways. 758 00:35:58,440 --> 00:36:00,440 Of course, then you would want to see something, 759 00:36:00,440 --> 00:36:02,390 like maybe that's worse for the rich 760 00:36:02,390 --> 00:36:04,620 compared to the poor or things like that. 761 00:36:04,620 --> 00:36:05,840 But that's exactly right. 762 00:36:05,840 --> 00:36:08,690 So there could be essentially labor costs 763 00:36:08,690 --> 00:36:10,700 or any sort of other distractions related 764 00:36:10,700 --> 00:36:14,628 to the harvest, which-- 765 00:36:14,628 --> 00:36:16,920 this is kind of related to what [INAUDIBLE] was saying, 766 00:36:16,920 --> 00:36:18,740 which is the harvest itself might 767 00:36:18,740 --> 00:36:22,438 have these kinds of effects. 768 00:36:22,438 --> 00:36:24,230 OK, I think we mentioned most of the things 769 00:36:24,230 --> 00:36:27,440 that I have on my list. 770 00:36:27,440 --> 00:36:29,750 So there's first one is calorie consumption, which 771 00:36:29,750 --> 00:36:32,630 is sort of the typical thing that development economists can 772 00:36:32,630 --> 00:36:36,860 study a lot, which is to say, poor nutrition 773 00:36:36,860 --> 00:36:39,200 might make people do worse. 774 00:36:39,200 --> 00:36:40,390 It's bad for attention. 775 00:36:40,390 --> 00:36:43,860 We talked a little bit about shopping on a hungry stomach, 776 00:36:43,860 --> 00:36:49,020 but also think about doing tests or exams on an empty stomach 777 00:36:49,020 --> 00:36:50,760 is probably not a good idea. 778 00:36:50,760 --> 00:36:54,740 The author's have some evidence that the food expenditures are 779 00:36:54,740 --> 00:36:59,240 pretty similar pre and post high harvest from some other sample. 780 00:36:59,240 --> 00:37:01,430 Overall, malnutrition doesn't seem 781 00:37:01,430 --> 00:37:05,240 to be a huge issue in this area. 782 00:37:05,240 --> 00:37:06,950 Having said that, I think it's also 783 00:37:06,950 --> 00:37:10,255 reasonable to think that pre and post harvest you should have, 784 00:37:10,255 --> 00:37:11,130 actually, more money. 785 00:37:11,130 --> 00:37:13,297 And then you've got to spend the money on something. 786 00:37:13,297 --> 00:37:15,260 And presumably, some of that would go on food. 787 00:37:15,260 --> 00:37:19,070 So the authors argue that nutrition is not a big issue. 788 00:37:19,070 --> 00:37:21,500 Then there's sort of two broad issues, which 789 00:37:21,500 --> 00:37:25,580 I think was Joseph and Katherine's comments, which 790 00:37:25,580 --> 00:37:27,800 is about the uncertainty of the harvest size 791 00:37:27,800 --> 00:37:30,920 and some issues related to labor effort. 792 00:37:30,920 --> 00:37:34,490 And so, here, the authors have some evidence 793 00:37:34,490 --> 00:37:37,537 from post-harvest pre-payment sample. 794 00:37:37,537 --> 00:37:38,370 What does that mean? 795 00:37:38,370 --> 00:37:40,670 This is a sample that these are people 796 00:37:40,670 --> 00:37:48,350 who have harvested already, so they have already 797 00:37:48,350 --> 00:37:49,680 exerted the labor effort. 798 00:37:49,680 --> 00:37:55,190 And they also know already their approximate payment. 799 00:37:55,190 --> 00:37:59,000 And-- sorry. 800 00:37:59,000 --> 00:38:00,740 I was getting confused by this. 801 00:38:00,740 --> 00:38:04,370 So these are people who have already done their harvest. 802 00:38:04,370 --> 00:38:06,110 They have done all the work already. 803 00:38:06,110 --> 00:38:09,050 They know already what the harvest size will be like. 804 00:38:09,050 --> 00:38:12,260 But those people, essentially, are still 805 00:38:12,260 --> 00:38:14,190 not doing better compared to the people who 806 00:38:14,190 --> 00:38:15,710 have received their cash. 807 00:38:15,710 --> 00:38:18,530 So that essentially is to say, even 808 00:38:18,530 --> 00:38:22,170 once you have done all the effort and so on, 809 00:38:22,170 --> 00:38:27,020 that doesn't seem to help in a sense of you're fully doing, 810 00:38:27,020 --> 00:38:28,890 you're not exhausted from the work already. 811 00:38:28,890 --> 00:38:30,557 You already have all your harvest there. 812 00:38:30,557 --> 00:38:32,280 You already know how big your harvest is, 813 00:38:32,280 --> 00:38:35,723 but you haven't really received the money yet. 814 00:38:35,723 --> 00:38:37,640 And you know already what the harvest size is. 815 00:38:37,640 --> 00:38:40,067 It can't really be about anxiety of the harvest size. 816 00:38:40,067 --> 00:38:42,150 Yet if you compare those people to the people that 817 00:38:42,150 --> 00:38:45,000 received the money, you saw few differences 818 00:38:45,000 --> 00:38:48,960 between those people and the people 819 00:38:48,960 --> 00:38:51,150 who have done already the harvest. 820 00:38:51,150 --> 00:38:56,220 And so that argues that essentially it's 821 00:38:56,220 --> 00:39:00,390 not about anxiety, per se, about the harvest size, 822 00:39:00,390 --> 00:39:02,730 but rather about just having money 823 00:39:02,730 --> 00:39:05,640 in your pocket versus not. 824 00:39:05,640 --> 00:39:08,130 Let me see what the-- 825 00:39:08,130 --> 00:39:09,994 is this the correct graph? 826 00:39:15,778 --> 00:39:16,750 I see. 827 00:39:16,750 --> 00:39:18,940 So this is a little bit misleadingly labeled. 828 00:39:18,940 --> 00:39:21,040 What this is supposed to say is this 829 00:39:21,040 --> 00:39:23,020 is post-harvest and pre-harvest. 830 00:39:23,020 --> 00:39:25,390 But what they mean by post-harvest and pre-harvest, 831 00:39:25,390 --> 00:39:27,640 post-harvest is meant by you have 832 00:39:27,640 --> 00:39:29,630 received the cash versus not. 833 00:39:29,630 --> 00:39:32,440 But both of these are actually both post-harvest in the sense 834 00:39:32,440 --> 00:39:36,850 that they have done already the work. 835 00:39:36,850 --> 00:39:38,440 Anyway, sorry, that's a bit confusing. 836 00:39:38,440 --> 00:39:41,403 But essentially, what they're trying to say 837 00:39:41,403 --> 00:39:42,820 is essentially what really matters 838 00:39:42,820 --> 00:39:46,930 is not the work around the harvest, per se, 839 00:39:46,930 --> 00:39:48,610 or the uncertainty around the harvest. 840 00:39:48,610 --> 00:39:52,540 It's really about receiving the cash versus not. 841 00:39:52,540 --> 00:39:56,180 And then there's another problem, 842 00:39:56,180 --> 00:39:58,060 which you haven't really brought up 843 00:39:58,060 --> 00:40:00,950 which is the issue of learning effects, right? 844 00:40:00,950 --> 00:40:03,990 When people do the task several times, 845 00:40:03,990 --> 00:40:05,490 presumably when you do a test twice, 846 00:40:05,490 --> 00:40:08,350 you're going to do better. 847 00:40:08,350 --> 00:40:11,470 But to address this issue, they also have what's 848 00:40:11,470 --> 00:40:13,000 called a hold-out sample that takes 849 00:40:13,000 --> 00:40:16,040 the cognitive tests for the first time post-harvest. 850 00:40:16,040 --> 00:40:19,450 So what I showed you before was proposed for both people 851 00:40:19,450 --> 00:40:20,800 that have both of these tests. 852 00:40:20,800 --> 00:40:23,080 There are some samples that's only done 853 00:40:23,080 --> 00:40:25,360 the task once post-harvest. 854 00:40:25,360 --> 00:40:27,370 And they don't perform worse than people 855 00:40:27,370 --> 00:40:30,460 who do the task for the second time, which seems to say 856 00:40:30,460 --> 00:40:32,218 it's not really about learning. 857 00:40:32,218 --> 00:40:33,760 Having said that, that is essentially 858 00:40:33,760 --> 00:40:36,220 only a small subsample. 859 00:40:36,220 --> 00:40:38,980 Comparison really seems mostly underpowered. 860 00:40:38,980 --> 00:40:42,176 And there are some concerns, surely, about still effects. 861 00:40:44,930 --> 00:40:46,130 Any questions on these? 862 00:40:59,630 --> 00:41:00,130 OK. 863 00:41:06,180 --> 00:41:08,100 So this is a study from a few years ago. 864 00:41:08,100 --> 00:41:13,170 So then what kind of follow up is there that sort 865 00:41:13,170 --> 00:41:14,670 of considers further evidence? 866 00:41:14,670 --> 00:41:17,405 So there's one very nice study by Carvalho et al. 867 00:41:17,405 --> 00:41:21,390 in 2015 that looks at the same issue in the US. 868 00:41:21,390 --> 00:41:24,750 And they looked at cognition and decision making of US 869 00:41:24,750 --> 00:41:27,870 households around paydays. 870 00:41:27,870 --> 00:41:30,540 And essentially, they find no cognitive effects whatsoever. 871 00:41:30,540 --> 00:41:32,940 They also find no effects of decision 872 00:41:32,940 --> 00:41:36,070 making as one would have expected. 873 00:41:36,070 --> 00:41:39,870 It raises the question about what's going on here. 874 00:41:39,870 --> 00:41:41,380 And [INAUDIBLE] what's going on. 875 00:41:41,380 --> 00:41:43,380 So it could be that this is an external validity 876 00:41:43,380 --> 00:41:44,280 issue in some sense. 877 00:41:44,280 --> 00:41:46,860 In a sense, really what is needed here 878 00:41:46,860 --> 00:41:48,840 is really extreme poverty and really 879 00:41:48,840 --> 00:41:52,500 large differences in people's income or the amount of money 880 00:41:52,500 --> 00:41:53,810 that they have available. 881 00:41:53,810 --> 00:41:56,670 And when you look at US households, at least 882 00:41:56,670 --> 00:41:59,130 the households that were considered in the Carvalho 883 00:41:59,130 --> 00:42:00,690 study about payday, well, there's 884 00:42:00,690 --> 00:42:02,520 differences in how much money they have, 885 00:42:02,520 --> 00:42:03,570 cash on hand they have. 886 00:42:03,570 --> 00:42:06,080 The difference is actually not that huge. 887 00:42:06,080 --> 00:42:09,300 And so that might just be not sufficiently [INAUDIBLE] 888 00:42:09,300 --> 00:42:11,400 around those paydays to be able to generate 889 00:42:11,400 --> 00:42:13,560 those type of effects. 890 00:42:13,560 --> 00:42:17,830 It could also be that these effects don't really 891 00:42:17,830 --> 00:42:22,910 replicate in a sense of it's a replicability issue, which 892 00:42:22,910 --> 00:42:24,888 could be a concern as well. 893 00:42:24,888 --> 00:42:26,930 There's a nice study-- and this gets to the issue 894 00:42:26,930 --> 00:42:30,020 that I think Joseph mentioned, which 895 00:42:30,020 --> 00:42:35,570 is a study by Lichand and Mani looking at drought insurance. 896 00:42:35,570 --> 00:42:39,440 And what they essentially argue is that, 897 00:42:39,440 --> 00:42:41,660 when you [? provide ?] [? people with ?] insurance-- 898 00:42:41,660 --> 00:42:45,200 so usually insurance, or people would argue, is useful. 899 00:42:45,200 --> 00:42:47,582 If a bad state happens in the world, 900 00:42:47,582 --> 00:42:49,790 you can essentially get-- might get a payment, right? 901 00:42:49,790 --> 00:42:52,880 If I get some health shock or if my harvest is bad or the like, 902 00:42:52,880 --> 00:42:54,940 I get some money from the insurance company. 903 00:42:54,940 --> 00:42:56,210 And that is good. 904 00:42:56,210 --> 00:42:58,730 Because in the bad state, the marginal utility 905 00:42:58,730 --> 00:43:00,740 is really high of receiving money. 906 00:43:00,740 --> 00:43:04,280 And so if I am willing to pay for insurance right now, 907 00:43:04,280 --> 00:43:08,660 in the future receiving-- so I'm willing to pay for insurance 908 00:43:08,660 --> 00:43:09,160 now. 909 00:43:09,160 --> 00:43:12,070 Because in the future, in a bad state of the world, 910 00:43:12,070 --> 00:43:15,400 I value that money more than in a good state of the world. 911 00:43:15,400 --> 00:43:19,260 So in a good state [INAUDIBLE] willing to pay for insurance. 912 00:43:19,260 --> 00:43:21,810 Now, what Lichand and Mani are instead arguing is, 913 00:43:21,810 --> 00:43:23,400 well, there's an additional value 914 00:43:23,400 --> 00:43:24,900 of insurance, which essentially it's 915 00:43:24,900 --> 00:43:29,160 helping reduce their anxiety and worries about money ex ante 916 00:43:29,160 --> 00:43:30,330 in all states of the world. 917 00:43:30,330 --> 00:43:33,670 That is to say, if I'm really worried about bad harvest 918 00:43:33,670 --> 00:43:35,910 shocks or other stuff, health stocks happening 919 00:43:35,910 --> 00:43:38,503 in the future, that might really frazzle me and really 920 00:43:38,503 --> 00:43:40,920 sort of worry you all the time, which in turn might affect 921 00:43:40,920 --> 00:43:42,960 people's cognitive performance. 922 00:43:42,960 --> 00:43:44,790 Well, that's in all states of the world. 923 00:43:44,790 --> 00:43:46,860 Even when you're doing well right now, 924 00:43:46,860 --> 00:43:48,480 even if nothing bad ever happens, 925 00:43:48,480 --> 00:43:50,925 you're going to do worse today because you're 926 00:43:50,925 --> 00:43:52,050 worried about these things. 927 00:43:52,050 --> 00:43:54,450 And sort of providing insurance, therefore, 928 00:43:54,450 --> 00:43:57,240 might help people better even in good states of the world 929 00:43:57,240 --> 00:43:59,070 or in all states of the world in addition 930 00:43:59,070 --> 00:44:01,800 to sort of having the insurance value of helping people 931 00:44:01,800 --> 00:44:04,200 in that state of the world. 932 00:44:04,200 --> 00:44:06,228 Well, they have some evidence of it. 933 00:44:06,228 --> 00:44:07,770 There is some mixed evidence overall. 934 00:44:07,770 --> 00:44:09,900 But I think the idea of insurance 935 00:44:09,900 --> 00:44:13,290 being helpful for the poor, for anybody, not just 936 00:44:13,290 --> 00:44:14,910 because it helps in bad states, but it 937 00:44:14,910 --> 00:44:16,830 helps people worry about bad states, 938 00:44:16,830 --> 00:44:18,390 is a very nice one that hopefully 939 00:44:18,390 --> 00:44:21,080 will be explored further. 940 00:44:21,080 --> 00:44:25,038 Now, then another question that I think Jose was bringing up 941 00:44:25,038 --> 00:44:27,080 is to say, well, there are these cognitive tasks. 942 00:44:27,080 --> 00:44:28,580 Well, I showed you so far that there 943 00:44:28,580 --> 00:44:31,280 are these tasks and Raven's matrices and cognitive control. 944 00:44:31,280 --> 00:44:34,490 And sort of, arguably, IQ tests are important then and helpful. 945 00:44:34,490 --> 00:44:37,850 And we think that's helpful and maps to something 946 00:44:37,850 --> 00:44:39,182 useful for the world. 947 00:44:39,182 --> 00:44:40,640 But it's a little bit hard to tell. 948 00:44:40,640 --> 00:44:42,050 Does this actually matter for income? 949 00:44:42,050 --> 00:44:43,820 Is this really important or not important? 950 00:44:43,820 --> 00:44:46,650 And how much does it-- 951 00:44:46,650 --> 00:44:52,970 so in a paper with [INAUDIBLE] we 952 00:44:52,970 --> 00:44:54,500 looked at this in a field setting 953 00:44:54,500 --> 00:45:00,230 where the workers in Orissa and rural areas in India. 954 00:45:00,230 --> 00:45:03,140 And what we did there is we hired people 955 00:45:03,140 --> 00:45:07,910 for about two weeks to do a simple labor cast where they 956 00:45:07,910 --> 00:45:13,010 were doing leaf plates, so essentially putting together 957 00:45:13,010 --> 00:45:18,320 leafs into plates, which are sort of used in many settings, 958 00:45:18,320 --> 00:45:22,160 by stitching them together using little wooden sticks. 959 00:45:22,160 --> 00:45:24,770 And so people are hired for two weeks. 960 00:45:24,770 --> 00:45:28,280 And then for the sample, we varied. 961 00:45:28,280 --> 00:45:31,580 Some people were paid earlier, and some people 962 00:45:31,580 --> 00:45:32,760 were paid later. 963 00:45:32,760 --> 00:45:34,940 So everybody was paid exactly the same, 964 00:45:34,940 --> 00:45:38,120 conditional on showing up and conditional on how much they 965 00:45:38,120 --> 00:45:38,630 produced. 966 00:45:38,630 --> 00:45:41,172 So their piece rates, how much they were paid, were the same. 967 00:45:41,172 --> 00:45:43,552 And their attendance paid for showing up. 968 00:45:43,552 --> 00:45:46,010 The only difference was that some people were paid earlier, 969 00:45:46,010 --> 00:45:49,290 and some people were paid later. 970 00:45:49,290 --> 00:45:54,090 So that allows us then look at how do people, the same people, 971 00:45:54,090 --> 00:45:56,510 how would they perform when they're paid already 972 00:45:56,510 --> 00:46:00,380 versus not, compared to another group that is essentially 973 00:46:00,380 --> 00:46:02,340 only paid later. 974 00:46:02,340 --> 00:46:04,160 And this is a period in the lean period 975 00:46:04,160 --> 00:46:06,710 when people are extremely financially constrained. 976 00:46:06,710 --> 00:46:08,450 So people are really short on cash. 977 00:46:08,450 --> 00:46:10,640 And you can look, essentially, really 978 00:46:10,640 --> 00:46:14,650 at the impact of transfers or cash 979 00:46:14,650 --> 00:46:16,890 constraints in this setting. 980 00:46:16,890 --> 00:46:19,100 What we find is a relatively clear evidence 981 00:46:19,100 --> 00:46:23,510 that paying people early makes people a lot more productive. 982 00:46:23,510 --> 00:46:25,400 And moreover, these effects are the largest 983 00:46:25,400 --> 00:46:26,600 for the poorest workers. 984 00:46:26,600 --> 00:46:29,060 So essentially, when you sort of divide the sample in two, 985 00:46:29,060 --> 00:46:31,940 along the people who are richer and poorer to start with, 986 00:46:31,940 --> 00:46:35,240 people who are particularly poor have the largest impacts 987 00:46:35,240 --> 00:46:36,148 in the sample. 988 00:46:36,148 --> 00:46:37,940 And this have sort of pretty large effects. 989 00:46:37,940 --> 00:46:40,800 It's about 5% to 10% of the productivity, 990 00:46:40,800 --> 00:46:44,030 which is doesn't sound that large in absolute terms. 991 00:46:44,030 --> 00:46:46,070 But in relative terms or in terms 992 00:46:46,070 --> 00:46:48,200 of when you double people's wages, 993 00:46:48,200 --> 00:46:53,940 people's earnings go up only as much or not much more. 994 00:46:53,940 --> 00:46:55,820 So really increasing people's productivity 995 00:46:55,820 --> 00:46:57,800 is very, very hard in these settings. 996 00:46:57,800 --> 00:47:00,110 And relatively minor interventions, 997 00:47:00,110 --> 00:47:03,740 such as the one that we did, had pretty large effects 998 00:47:03,740 --> 00:47:07,250 in the real world setting for people for whom this is really 999 00:47:07,250 --> 00:47:11,340 their real jobs in their real life for about two weeks. 1000 00:47:11,340 --> 00:47:14,190 So suppose you hired somebody for a year. 1001 00:47:14,190 --> 00:47:19,530 Should you pay them daily, weekly, monthly, or what? 1002 00:47:19,530 --> 00:47:22,220 And so what I'm arguing or what our evidence shows, 1003 00:47:22,220 --> 00:47:25,370 that when you hire people for two weeks, paying people twice, 1004 00:47:25,370 --> 00:47:28,460 as in paying people once after a week and then the rest 1005 00:47:28,460 --> 00:47:31,010 at the end, makes workers more productive 1006 00:47:31,010 --> 00:47:34,308 than paying workers only at the very end. 1007 00:47:34,308 --> 00:47:36,350 And assuming, you know, depending on the interest 1008 00:47:36,350 --> 00:47:40,680 rate-- but that seems to be a thing the company should do. 1009 00:47:40,680 --> 00:47:43,440 But of course, if you hire people for a year, 1010 00:47:43,440 --> 00:47:48,295 then paying people weekly versus monthly or biweekly, 1011 00:47:48,295 --> 00:47:49,920 the comparison becomes quite different. 1012 00:47:49,920 --> 00:47:51,837 Because essentially, the control group, that's 1013 00:47:51,837 --> 00:47:53,028 paid after two weeks. 1014 00:47:53,028 --> 00:47:54,570 Now, after two weeks, of course, they 1015 00:47:54,570 --> 00:47:57,690 have a lot more money because they haven't spent it 1016 00:47:57,690 --> 00:48:00,810 compared to the treatment group who's paid earlier. 1017 00:48:00,810 --> 00:48:06,160 And I think there, essentially, we can't really speak to that. 1018 00:48:06,160 --> 00:48:11,110 In some sense, our design is not really set up to do this. 1019 00:48:11,110 --> 00:48:15,570 You would have to do at least another week or two 1020 00:48:15,570 --> 00:48:17,760 to measure how is the control group now doing 1021 00:48:17,760 --> 00:48:20,610 compared to the treatment group or do it repeatedly. 1022 00:48:20,610 --> 00:48:23,915 And there might also be some effects on over time, 1023 00:48:23,915 --> 00:48:25,290 repeatedly, some of these effects 1024 00:48:25,290 --> 00:48:27,320 might be going away because workers learn 1025 00:48:27,320 --> 00:48:29,400 and so on and so forth. 1026 00:48:29,400 --> 00:48:33,060 I think of this evidence much more as a proof of concept 1027 00:48:33,060 --> 00:48:38,520 that, A, providing cash or alleviating cash constraints 1028 00:48:38,520 --> 00:48:41,580 among workers, either through some low interest rate 1029 00:48:41,580 --> 00:48:45,660 loans or some early payments or some form of UBI or cash 1030 00:48:45,660 --> 00:48:48,510 transfers, unconditional or conditional cash transfers, 1031 00:48:48,510 --> 00:48:50,910 essentially improving workers financial situation 1032 00:48:50,910 --> 00:48:54,410 in some ways, can be productive for firms. 1033 00:48:54,410 --> 00:48:56,430 Now, how the firm then actually does that 1034 00:48:56,430 --> 00:48:57,690 we don't necessarily know. 1035 00:48:57,690 --> 00:48:59,340 And this is sort of too small, short, 1036 00:48:59,340 --> 00:49:01,308 of an experiment to show that. 1037 00:49:01,308 --> 00:49:03,600 But it's sort of proof of concept that, in a real world 1038 00:49:03,600 --> 00:49:05,830 setting with very high stakes for workers-- 1039 00:49:05,830 --> 00:49:09,790 this is their real earnings-- there seem to be these effects. 1040 00:49:09,790 --> 00:49:11,377 So for firms, it might be, well, do 1041 00:49:11,377 --> 00:49:13,500 they have to, in fact, try to improve 1042 00:49:13,500 --> 00:49:16,770 their financial situation [INAUDIBLE].. 1043 00:49:16,770 --> 00:49:19,890 Or for governments, it might be valuable to think 1044 00:49:19,890 --> 00:49:23,157 about cash transfers as a way to do-- so usually, 1045 00:49:23,157 --> 00:49:24,990 when you think about cash transfers-- so let 1046 00:49:24,990 --> 00:49:27,010 me actually just talk about this for a second. 1047 00:49:27,010 --> 00:49:30,540 And then we can talk about other confounds of the study. 1048 00:49:30,540 --> 00:49:33,450 So usually, when you think about the public debate about cash 1049 00:49:33,450 --> 00:49:36,840 transfers and about sort of welfare programs for the poor, 1050 00:49:36,840 --> 00:49:39,065 often sort of the right-wing response is, 1051 00:49:39,065 --> 00:49:40,690 well, aren't the poor going to be lazy? 1052 00:49:40,690 --> 00:49:41,940 And they're not going to work. 1053 00:49:41,940 --> 00:49:44,698 And then what about effort and so on and so forth? 1054 00:49:44,698 --> 00:49:45,990 And they get used to the money. 1055 00:49:45,990 --> 00:49:48,990 And then don't work hard enough eventually. 1056 00:49:48,990 --> 00:49:51,510 Well, the evidence that we have here in our paper 1057 00:49:51,510 --> 00:49:53,790 seems to say, in fact, the opposite. 1058 00:49:53,790 --> 00:49:56,922 That is to say workers, when you alleviate 1059 00:49:56,922 --> 00:49:59,130 their financial constraints, when you give them cash, 1060 00:49:59,130 --> 00:50:00,570 they become more productive. 1061 00:50:00,570 --> 00:50:03,850 And they work harder than otherwise. 1062 00:50:03,850 --> 00:50:06,150 Granted, we don't have any labor supply response. 1063 00:50:06,150 --> 00:50:08,650 What I'm showing you here is essentially productivity, which 1064 00:50:08,650 --> 00:50:11,760 is how hard a worker's working or how much work a worker is 1065 00:50:11,760 --> 00:50:15,450 producing per hour worked. 1066 00:50:15,450 --> 00:50:19,088 But I think similar things could be true for cash transfers. 1067 00:50:19,088 --> 00:50:20,880 And there's some quite interesting evidence 1068 00:50:20,880 --> 00:50:23,460 on cash transfer programs. 1069 00:50:23,460 --> 00:50:27,390 So both cash transfer and, in particular, 1070 00:50:27,390 --> 00:50:29,070 what's called ultra-poor programs, which 1071 00:50:29,070 --> 00:50:34,380 are sort of these multi-faceted asset programs, 1072 00:50:34,380 --> 00:50:38,250 leads to large and sustained increases in asset, savings, 1073 00:50:38,250 --> 00:50:39,690 consumptions, et cetera. 1074 00:50:39,690 --> 00:50:44,190 That is to say, once you provide people with financial resources 1075 00:50:44,190 --> 00:50:46,690 when they're very poor, not only do they better 1076 00:50:46,690 --> 00:50:47,760 in the short run. 1077 00:50:47,760 --> 00:50:49,800 But in the case of the ultra-poor programs, 1078 00:50:49,800 --> 00:50:52,030 in the long run three to five years later, 1079 00:50:52,030 --> 00:50:55,530 people are doing better in terms of having more assets, 1080 00:50:55,530 --> 00:50:58,876 saving more, consuming more, and so on. 1081 00:50:58,876 --> 00:51:04,300 And that seems to say that there might be an issue going on 1082 00:51:04,300 --> 00:51:06,640 and some form of a poverty trap going on. 1083 00:51:06,640 --> 00:51:08,890 And somewhere of the underlying potential channels 1084 00:51:08,890 --> 00:51:11,510 might be things like scarcity, stress, mental health, and so 1085 00:51:11,510 --> 00:51:12,010 on. 1086 00:51:12,010 --> 00:51:14,635 We're going to talk a little bit about mental health and stress 1087 00:51:14,635 --> 00:51:15,500 in a second. 1088 00:51:15,500 --> 00:51:18,430 But essentially, if there are these types of effects going on 1089 00:51:18,430 --> 00:51:22,810 for the government or any other sort of public policy, 1090 00:51:22,810 --> 00:51:28,090 these kinds of programs, conditional cash transfers, 1091 00:51:28,090 --> 00:51:31,240 in addition to having the advantage of improving people's 1092 00:51:31,240 --> 00:51:37,170 well-being and having the high marginal utility of money when 1093 00:51:37,170 --> 00:51:39,440 they're very poor, it might also, in addition, 1094 00:51:39,440 --> 00:51:42,050 make people more productive as opposed 1095 00:51:42,050 --> 00:51:45,378 to a working less or the like. 1096 00:51:45,378 --> 00:51:46,920 So I think those two things, I think, 1097 00:51:46,920 --> 00:51:51,270 are sort of the takeaways. 1098 00:51:51,270 --> 00:51:53,730 If one wanted to understand optimal pay structures, 1099 00:51:53,730 --> 00:51:56,940 one would have to do longer run types of experiments, 1100 00:51:56,940 --> 00:52:00,280 as Natalie pointed out. 1101 00:52:00,280 --> 00:52:04,080 So essentially, the way we set this up is we 1102 00:52:04,080 --> 00:52:05,730 essentially pay people-- 1103 00:52:05,730 --> 00:52:06,230 sorry. 1104 00:52:06,230 --> 00:52:09,060 This is my Slack making noise-- 1105 00:52:09,060 --> 00:52:14,990 pay people to-- sorry, [INAUDIBLE]---- 1106 00:52:14,990 --> 00:52:16,250 people through the employer. 1107 00:52:16,250 --> 00:52:18,500 Essentially, we said, OK, the employer is paying, now, 1108 00:52:18,500 --> 00:52:20,390 earlier versus later. 1109 00:52:20,390 --> 00:52:25,100 And naturally, then the worker might just [INAUDIBLE] happier 1110 00:52:25,100 --> 00:52:28,350 or doing better financially, but also like the employer better 1111 00:52:28,350 --> 00:52:30,097 and saying, look, you just paid me early. 1112 00:52:30,097 --> 00:52:31,680 I now trust you more that you're going 1113 00:52:31,680 --> 00:52:32,940 to be paying me in the future. 1114 00:52:32,940 --> 00:52:34,470 Maybe that's some form of gift giving 1115 00:52:34,470 --> 00:52:37,053 or reciprocity, again, sort of happy about things, [INAUDIBLE] 1116 00:52:37,053 --> 00:52:40,240 work harder to make the employer happy. 1117 00:52:40,240 --> 00:52:43,340 There are several things to get at this. 1118 00:52:43,340 --> 00:52:45,490 And the most important part, perhaps, you also 1119 00:52:45,490 --> 00:52:50,500 have that we announced essentially the structure 1120 00:52:50,500 --> 00:52:52,990 a few days before the actual payment is made. 1121 00:52:52,990 --> 00:52:56,080 That is to say, on day five, we announce and say, on the 8th, 1122 00:52:56,080 --> 00:52:58,460 you're going to be paid versus we don't announce it. 1123 00:52:58,460 --> 00:52:59,980 We say you're going to be paid only 1124 00:52:59,980 --> 00:53:02,330 later at the end of the study. 1125 00:53:02,330 --> 00:53:08,100 And so if you think this is about reciprocity or feelings 1126 00:53:08,100 --> 00:53:11,550 towards the employer, you would think that then workers 1127 00:53:11,550 --> 00:53:13,440 should then already be working harder 1128 00:53:13,440 --> 00:53:16,560 once they hear about when they get these kind of announcement 1129 00:53:16,560 --> 00:53:17,413 effects. 1130 00:53:17,413 --> 00:53:19,080 And it seems to be the case that there's 1131 00:53:19,080 --> 00:53:21,456 essentially no announcement effect whatsoever. 1132 00:53:21,456 --> 00:53:26,190 Workers only become productive pretty much precisely 1133 00:53:26,190 --> 00:53:29,110 once they receive their cash on hand, 1134 00:53:29,110 --> 00:53:31,050 which is very much consistent with what 1135 00:53:31,050 --> 00:53:35,010 I showed you earlier, the results from Mani et al., 1136 00:53:35,010 --> 00:53:35,940 in their study. 1137 00:53:35,940 --> 00:53:39,450 It seems to really be the case that knowing that somebody will 1138 00:53:39,450 --> 00:53:44,040 be paid is really not helping workers or making workers 1139 00:53:44,040 --> 00:53:47,722 more productive both in the form of their relationship 1140 00:53:47,722 --> 00:53:49,680 or due to their relationship with the employer, 1141 00:53:49,680 --> 00:53:59,297 but also due to other effects, including perhaps their worries 1142 00:53:59,297 --> 00:54:01,380 or concerns that they might have about [INAUDIBLE] 1143 00:54:01,380 --> 00:54:05,070 So it seems to be that similarly from the Mani et al. 1144 00:54:05,070 --> 00:54:09,100 paper, when workers have done their harvest 1145 00:54:09,100 --> 00:54:12,060 and you have the harvest in front of you 1146 00:54:12,060 --> 00:54:15,330 and it's worth so many rupees, that 1147 00:54:15,330 --> 00:54:17,977 doesn't seem to increase their cognitive scores. 1148 00:54:17,977 --> 00:54:19,560 That's what I was showing you earlier. 1149 00:54:19,560 --> 00:54:22,350 Really what it seems to be is you have to be actually paid. 1150 00:54:22,350 --> 00:54:25,240 So once workers actually have the cash in hand, only 1151 00:54:25,240 --> 00:54:27,505 then their cognitive function goes up. 1152 00:54:27,505 --> 00:54:29,130 There seems to be something [INAUDIBLE] 1153 00:54:29,130 --> 00:54:34,455 about this [INAUDIBLE] example I have for you is suppose 1154 00:54:34,455 --> 00:54:35,580 you have to pay your bills. 1155 00:54:35,580 --> 00:54:37,800 Suppose you don't have enough money. 1156 00:54:37,800 --> 00:54:39,400 And then, on the first of the month, 1157 00:54:39,400 --> 00:54:41,400 you're going to be paid your stipend or whatever 1158 00:54:41,400 --> 00:54:42,460 as a student. 1159 00:54:42,460 --> 00:54:46,140 There's something distinctly different from having actually 1160 00:54:46,140 --> 00:54:47,990 been paid the money on your bank account 1161 00:54:47,990 --> 00:54:49,860 than having it in your possession 1162 00:54:49,860 --> 00:54:52,313 that is yours or being sent a check or whatever, 1163 00:54:52,313 --> 00:54:54,480 as opposed to knowing it's going to come in two days 1164 00:54:54,480 --> 00:54:57,030 and you have your outstanding credit card bills 1165 00:54:57,030 --> 00:54:59,300 even if you know that you can pay them. 1166 00:54:59,300 --> 00:55:01,050 That's, in some sense, from introspection, 1167 00:55:01,050 --> 00:55:03,427 the best example I have for you. 1168 00:55:03,427 --> 00:55:05,010 But it seems to be-- and you're right. 1169 00:55:05,010 --> 00:55:06,000 In some sense, there could have been 1170 00:55:06,000 --> 00:55:08,000 some effect of just telling workers you're going 1171 00:55:08,000 --> 00:55:09,742 to be paid early versus later. 1172 00:55:09,742 --> 00:55:11,200 But it doesn't seem to be the case. 1173 00:55:11,200 --> 00:55:13,590 This really seems to be the case of receiving 1174 00:55:13,590 --> 00:55:15,300 the money, having cash in hand, and then 1175 00:55:15,300 --> 00:55:17,010 being able to pay the money lender 1176 00:55:17,010 --> 00:55:19,410 or pay essentially some person that you owe 1177 00:55:19,410 --> 00:55:21,840 money, some money back, seems to be what's 1178 00:55:21,840 --> 00:55:32,780 quite important for generating those kinds of effects OK 1179 00:55:32,780 --> 00:55:35,393 so let's move on 1180 00:55:35,393 --> 00:55:36,560 I already talked about this. 1181 00:55:36,560 --> 00:55:37,935 Essentially, yeah, so there seems 1182 00:55:37,935 --> 00:55:40,910 to be these large effects of ultra 1183 00:55:40,910 --> 00:55:43,160 poor programs, which seem to say that there 1184 00:55:43,160 --> 00:55:46,790 might be some underlying behavioral or other poverty 1185 00:55:46,790 --> 00:55:48,045 trap going on. 1186 00:55:48,045 --> 00:55:49,920 And sort of we don't have the answer to that, 1187 00:55:49,920 --> 00:55:53,480 but one hypothesis is that some of the underlying psychological 1188 00:55:53,480 --> 00:55:58,150 issues might be responsible for that. 1189 00:55:58,150 --> 00:56:01,840 Now, what are other poverty induced deprivation? 1190 00:56:01,840 --> 00:56:04,840 So poverty entails a bunch of different deprivations 1191 00:56:04,840 --> 00:56:07,540 beyond money, including malnutrition, high levels 1192 00:56:07,540 --> 00:56:10,040 of stress, sleep deprivation. 1193 00:56:10,040 --> 00:56:12,620 People's sleeping conditions tend to be terrible. 1194 00:56:12,620 --> 00:56:16,790 Noise pollution, the poor are more disproportionately exposed 1195 00:56:16,790 --> 00:56:17,750 to noise. 1196 00:56:17,750 --> 00:56:22,640 There's environmental pollution, in particular air, 1197 00:56:22,640 --> 00:56:25,100 that the poor are much more exposed to. 1198 00:56:25,100 --> 00:56:27,470 Heat, the poor often don't have access 1199 00:56:27,470 --> 00:56:30,200 to heat and/or temperature more generally. 1200 00:56:30,200 --> 00:56:34,440 The poor are more exposed to high temperature 1201 00:56:34,440 --> 00:56:37,440 and don't have access to ACs often. 1202 00:56:37,440 --> 00:56:40,330 There is also some form of stigma and exclusion, 1203 00:56:40,330 --> 00:56:43,140 which might have certain cognitive and other effects. 1204 00:56:43,140 --> 00:56:47,900 There's some evidence of disproportionate substance 1205 00:56:47,900 --> 00:56:48,400 abuse. 1206 00:56:48,400 --> 00:56:54,930 I've shown you some evidence of increased excessive drinking. 1207 00:56:54,930 --> 00:56:57,900 And there's also quite a bit of evidence 1208 00:56:57,900 --> 00:57:03,890 of increased mental illness, especially among the poor. 1209 00:57:03,890 --> 00:57:06,530 So within any given location, the poor 1210 00:57:06,530 --> 00:57:09,630 are disproportionately affected by mental illness, 1211 00:57:09,630 --> 00:57:12,750 including things like depression and anxiety. 1212 00:57:12,750 --> 00:57:15,500 But there's a bunch of research in other settings 1213 00:57:15,500 --> 00:57:21,320 that shows that each of these factors affect either health 1214 00:57:21,320 --> 00:57:23,090 and/or cognitive function. 1215 00:57:23,090 --> 00:57:25,670 And so you might wonder how are these factors then affecting 1216 00:57:25,670 --> 00:57:28,280 people's decision making and choices. 1217 00:57:28,280 --> 00:57:30,170 And just to give you some example of this, 1218 00:57:30,170 --> 00:57:33,000 this is some work that we have done in Chennai. 1219 00:57:33,000 --> 00:57:35,610 So to give some sense of what this looks like, 1220 00:57:35,610 --> 00:57:38,250 the poor essentially tend to have very, very challenging 1221 00:57:38,250 --> 00:57:39,600 sleeping conditions. 1222 00:57:39,600 --> 00:57:41,670 There's dust, noise, mosquitoes. 1223 00:57:41,670 --> 00:57:42,930 People sleep in the same room. 1224 00:57:42,930 --> 00:57:45,540 People sleep outside in the middle of the street. 1225 00:57:45,540 --> 00:57:47,430 And it's hot. 1226 00:57:47,430 --> 00:57:48,990 There's people sleeping on the floor. 1227 00:57:48,990 --> 00:57:51,750 So essentially, any challenging sleeping conditions 1228 00:57:51,750 --> 00:57:54,790 that you can think of you can find it among the urban poor. 1229 00:57:54,790 --> 00:57:56,950 And so one question you might ask is, 1230 00:57:56,950 --> 00:58:01,710 well, then does this lack of good sleep affect 1231 00:58:01,710 --> 00:58:06,808 people's capacity to work and their decision making? 1232 00:58:06,808 --> 00:58:08,350 And so in our study, what we do is we 1233 00:58:08,350 --> 00:58:10,870 objectively measure sleep quantity and quality 1234 00:58:10,870 --> 00:58:11,820 in Chennai. 1235 00:58:11,820 --> 00:58:13,960 And we document severe sleep deprivation 1236 00:58:13,960 --> 00:58:17,810 and alarmingly low quality of sleep in is setting. 1237 00:58:17,810 --> 00:58:18,970 What do I mean by this? 1238 00:58:18,970 --> 00:58:22,690 People sleep on average about 6.5 hours per night. 1239 00:58:22,690 --> 00:58:25,390 And the quality of this sleep is low, 1240 00:58:25,390 --> 00:58:30,370 which one measurement of that is their fraction of time 1241 00:58:30,370 --> 00:58:34,180 that they sleep along the time that they spend in bed 1242 00:58:34,180 --> 00:58:35,440 is about 70%. 1243 00:58:35,440 --> 00:58:38,020 That's what's referred to as sleep efficiency. 1244 00:58:38,020 --> 00:58:41,540 Sleep efficiency is way higher in rich countries. 1245 00:58:41,540 --> 00:58:43,820 It's about 85% to 90%. 1246 00:58:43,820 --> 00:58:49,560 So if the rich spend an hour in bed, they spend about 55 1247 00:58:49,560 --> 00:58:51,420 or something minutes asleep. 1248 00:58:51,420 --> 00:58:55,570 If the poor do that, it's about 40 something minutes. 1249 00:58:55,570 --> 00:58:57,630 So essentially, there's lots of awakenings. 1250 00:58:57,630 --> 00:58:59,670 And as a consequence, in our sample, 1251 00:58:59,670 --> 00:59:03,900 people seem about 5 and 1/2 hours per night. 1252 00:59:03,900 --> 00:59:06,420 Now, then what we do is we have two interventions 1253 00:59:06,420 --> 00:59:08,550 to increase sleep and provide people 1254 00:59:08,550 --> 00:59:12,780 information, sleep devices, which is mattress, ear 1255 00:59:12,780 --> 00:59:14,310 plugs, eye shields, and so on. 1256 00:59:14,310 --> 00:59:17,580 And we increased sleep by quite a bit for about three weeks. 1257 00:59:17,580 --> 00:59:20,310 And in this experiment, we also have an intervention 1258 00:59:20,310 --> 00:59:22,560 of a nap intervention that offers people naps 1259 00:59:22,560 --> 00:59:28,470 at the office, which provides high quantity and high quality 1260 00:59:28,470 --> 00:59:30,270 of sleep in that setting. 1261 00:59:30,270 --> 00:59:32,970 Now, what we find then is, somewhat surprisingly, 1262 00:59:32,970 --> 00:59:34,980 that actually increasing people's sleep 1263 00:59:34,980 --> 00:59:35,880 does very little. 1264 00:59:35,880 --> 00:59:39,120 So people sleep about 20 to 30 minutes more every night 1265 00:59:39,120 --> 00:59:40,380 for three weeks. 1266 00:59:40,380 --> 00:59:41,760 And we measure the labor supply. 1267 00:59:41,760 --> 00:59:44,870 We hire them for about that time. 1268 00:59:44,870 --> 00:59:48,050 People are not doing better in any way in terms of people 1269 00:59:48,050 --> 00:59:48,950 not working more. 1270 00:59:48,950 --> 00:59:50,370 People are not more productive. 1271 00:59:50,370 --> 00:59:52,620 People are not doing better in cognitive tasks. 1272 00:59:52,620 --> 00:59:54,670 They're not happier and so on and so forth. 1273 00:59:54,670 --> 00:59:57,170 They also don't make different decisions. 1274 00:59:57,170 --> 00:59:59,900 And if anything, you know, they decrease their labor supply. 1275 00:59:59,900 --> 01:00:01,940 They actually work fewer hours. 1276 01:00:01,940 --> 01:00:02,573 Why is that? 1277 01:00:02,573 --> 01:00:04,490 Well, because people are spending so much more 1278 01:00:04,490 --> 01:00:07,940 time in bed, they have now less time available during the day. 1279 01:00:07,940 --> 01:00:12,960 And some of that time goes into working fewer hours. 1280 01:00:12,960 --> 01:00:15,240 Now, in contrast, the nap treatment 1281 01:00:15,240 --> 01:00:17,760 has pretty large effects on the productivity, attention, 1282 01:00:17,760 --> 01:00:19,820 well-being, patience, and so on. 1283 01:00:19,820 --> 01:00:23,100 So it's not sleep cannot affect people's outcomes in these 1284 01:00:23,100 --> 01:00:23,940 settings. 1285 01:00:23,940 --> 01:00:25,935 But rather, a night sleep, as it is 1286 01:00:25,935 --> 01:00:29,280 does not really do very much, at least the type of night's sleep 1287 01:00:29,280 --> 01:00:31,110 that people are getting. 1288 01:00:31,110 --> 01:00:35,490 And so what we then provide some evidence of that what's 1289 01:00:35,490 --> 01:00:37,320 really important here or the reason 1290 01:00:37,320 --> 01:00:39,930 why people's sleep does not do very much 1291 01:00:39,930 --> 01:00:44,530 in increasing their productivity or improving their outcomes 1292 01:00:44,530 --> 01:00:47,470 is because the quality of sleep is so low. 1293 01:00:47,470 --> 01:00:49,360 So let me sort of look at the sample 1294 01:00:49,360 --> 01:00:52,150 and look at people who sleep better and worse at baseline 1295 01:00:52,150 --> 01:00:53,770 at the beginning of the study. 1296 01:00:53,770 --> 01:00:56,020 People who sleep better at the beginning of the study, 1297 01:00:56,020 --> 01:00:58,330 they actually tend to have reasonably large effects 1298 01:00:58,330 --> 01:00:59,740 on their productivity. 1299 01:00:59,740 --> 01:01:02,380 In contrast, people who have bad sleep 1300 01:01:02,380 --> 01:01:04,475 to start with, for them, essentially increasing 1301 01:01:04,475 --> 01:01:08,510 their sleep does nothing and potentially makes things worse. 1302 01:01:08,510 --> 01:01:09,430 So what did we learn? 1303 01:01:09,430 --> 01:01:12,190 I do not want you to take away that sleeping does not 1304 01:01:12,190 --> 01:01:13,110 do anything. 1305 01:01:13,110 --> 01:01:15,670 MIT students are chronically undersleeping. 1306 01:01:15,670 --> 01:01:19,630 And you could be probably sleeping more, all of you, 1307 01:01:19,630 --> 01:01:21,130 or most of you. 1308 01:01:21,130 --> 01:01:23,710 Essentially, what we learn from this 1309 01:01:23,710 --> 01:01:26,950 is that, when people's sleep conditions are really terrible, 1310 01:01:26,950 --> 01:01:32,400 well, then increasing one's sleep actually 1311 01:01:32,400 --> 01:01:33,430 doesn't do very much. 1312 01:01:33,430 --> 01:01:35,952 The return on sleeping is just very, very low. 1313 01:01:35,952 --> 01:01:37,410 And so what we learn, in some ways, 1314 01:01:37,410 --> 01:01:40,650 that the poor, at least in this setting, 1315 01:01:40,650 --> 01:01:43,740 are actually doing as well as they could, in a sense of they 1316 01:01:43,740 --> 01:01:44,907 do the best they can. 1317 01:01:44,907 --> 01:01:47,490 And since sleep is so bad, is so terrible, people sleep really 1318 01:01:47,490 --> 01:01:51,900 badly, increasing their sleep does not do very much. 1319 01:01:51,900 --> 01:01:54,450 That's not to say, if you actually fix their sleeping 1320 01:01:54,450 --> 01:01:56,940 conditions, if you put everybody into a nice hotel 1321 01:01:56,940 --> 01:01:59,760 or a nice bedroom or give them a nice house 1322 01:01:59,760 --> 01:02:01,740 and help them sleep better, that wouldn't 1323 01:02:01,740 --> 01:02:03,810 have potentially large effects. 1324 01:02:03,810 --> 01:02:06,668 But the study that we conducted was not doing that. 1325 01:02:06,668 --> 01:02:08,460 The study that we conducted was essentially 1326 01:02:08,460 --> 01:02:10,710 saying, take your sleep conditions as given. 1327 01:02:10,710 --> 01:02:12,150 And look at what happens when you 1328 01:02:12,150 --> 01:02:16,740 increase people's sleep duration for given sleep quality. 1329 01:02:16,740 --> 01:02:18,810 And that doesn't do very much. 1330 01:02:18,810 --> 01:02:21,420 In contrast, as I showed you or told you, 1331 01:02:21,420 --> 01:02:25,020 naps seem to be quite effective in having a large number 1332 01:02:25,020 --> 01:02:29,310 or range of effects, which seems to say that sleep can 1333 01:02:29,310 --> 01:02:31,060 potentially matter quite a bit. 1334 01:02:31,060 --> 01:02:34,380 But what really is important is try to figure out how could we 1335 01:02:34,380 --> 01:02:36,930 perhaps increase people's sleep quality which might 1336 01:02:36,930 --> 01:02:38,392 have then important effects. 1337 01:02:38,392 --> 01:02:40,350 Sorry, that was a lot of information, more than 1338 01:02:40,350 --> 01:02:42,060 I perhaps intended. 1339 01:02:42,060 --> 01:02:43,110 Any questions on that? 1340 01:02:58,050 --> 01:03:00,660 OK, so then the last piece, which 1341 01:03:00,660 --> 01:03:04,770 I'm going to just sort of say a little bit about, 1342 01:03:04,770 --> 01:03:09,750 is a paper that we just finished on the relationship 1343 01:03:09,750 --> 01:03:13,290 between poverty and common mental disorders 1344 01:03:13,290 --> 01:03:16,920 as they're referred to, which is anxiety and depression. 1345 01:03:16,920 --> 01:03:19,650 And what we there sort of argue-- 1346 01:03:19,650 --> 01:03:22,830 and it's a pretty short paper if you're interested. 1347 01:03:22,830 --> 01:03:27,832 I'll, in fact, put it on my website tonight. 1348 01:03:27,832 --> 01:03:29,790 We're looking at, essentially, the relationship 1349 01:03:29,790 --> 01:03:33,030 between poverty and these two conditions. 1350 01:03:33,030 --> 01:03:35,520 And what we do is, first, we show the causal effect 1351 01:03:35,520 --> 01:03:37,017 in both directions. 1352 01:03:37,017 --> 01:03:38,850 And so there's quite a bit of evidence that, 1353 01:03:38,850 --> 01:03:42,402 essentially, being poor is bad for people's mental health. 1354 01:03:42,402 --> 01:03:43,610 And these are causal studies. 1355 01:03:43,610 --> 01:03:46,290 So for example, providing people cash transfers 1356 01:03:46,290 --> 01:03:49,150 improves consistently their mental health. 1357 01:03:49,150 --> 01:03:51,600 So there's a causal effective from not having money 1358 01:03:51,600 --> 01:03:54,917 on people's mental health and anxiety and depression. 1359 01:03:54,917 --> 01:03:56,625 At the same time, there's a causal effect 1360 01:03:56,625 --> 01:04:01,590 of anxiety and depression on people's ability 1361 01:04:01,590 --> 01:04:05,440 to earn income and, thus, their poverty. 1362 01:04:05,440 --> 01:04:08,010 So for example, if you provide people with CBT 1363 01:04:08,010 --> 01:04:11,760 or some other forms of psychotherapy, 1364 01:04:11,760 --> 01:04:15,670 that reduces their depression. 1365 01:04:15,670 --> 01:04:18,340 And then, in turn, it increases their labor supply, 1366 01:04:18,340 --> 01:04:21,000 which in turn presumably increases their ability 1367 01:04:21,000 --> 01:04:22,570 to earn income. 1368 01:04:22,570 --> 01:04:25,200 So there's causal effects in both directions from poverty 1369 01:04:25,200 --> 01:04:29,220 to common mental disorders and from common mental disorders 1370 01:04:29,220 --> 01:04:30,960 to poverty. 1371 01:04:30,960 --> 01:04:33,600 And then what the paper does in a lot more detail is then 1372 01:04:33,600 --> 01:04:35,490 think about what are different mechanisms 1373 01:04:35,490 --> 01:04:39,390 for this causal relationship and what exactly, what evidence, 1374 01:04:39,390 --> 01:04:42,040 do they actually have of that. 1375 01:04:42,040 --> 01:04:46,110 And so on the side from poverty and from economic conditions 1376 01:04:46,110 --> 01:04:48,270 to mental health, there's a number 1377 01:04:48,270 --> 01:04:51,510 of different issues that could be quite important ranging 1378 01:04:51,510 --> 01:04:54,870 from stresses or just being exposed to lots of shocks 1379 01:04:54,870 --> 01:04:57,630 and, therefore, worries and uncertainty 1380 01:04:57,630 --> 01:04:58,823 to environmental conditions. 1381 01:04:58,823 --> 01:05:00,240 In particular, there's quite a bit 1382 01:05:00,240 --> 01:05:01,830 of emerging evidence of pollution 1383 01:05:01,830 --> 01:05:03,800 being bad for people's mental health, 1384 01:05:03,800 --> 01:05:08,650 so essentially pollution causing depression, for example. 1385 01:05:08,650 --> 01:05:11,250 There's some potential for physical health, 1386 01:05:11,250 --> 01:05:13,635 just being in bad health. 1387 01:05:13,635 --> 01:05:16,350 It might be bad for your mental health in part 1388 01:05:16,350 --> 01:05:21,130 because it causes physical pain and other illnesses. 1389 01:05:21,130 --> 01:05:25,090 There's some evidence of early life conditions 1390 01:05:25,090 --> 01:05:27,070 growing up in poverty tends to be 1391 01:05:27,070 --> 01:05:28,550 bad for people's mental health. 1392 01:05:28,550 --> 01:05:31,900 And there's some nice evidence of shocks 1393 01:05:31,900 --> 01:05:37,630 to mothers' and fathers' income might cause mental illness much 1394 01:05:37,630 --> 01:05:40,090 later in life for the children. 1395 01:05:40,090 --> 01:05:42,970 There's quite a bit of evidence of trauma, violence, and crime, 1396 01:05:42,970 --> 01:05:44,530 which the poor are disproportionately 1397 01:05:44,530 --> 01:05:46,940 exposed to, affecting people's mental health. 1398 01:05:46,940 --> 01:05:49,660 And finally, social status, shame, and isolation, 1399 01:05:49,660 --> 01:05:53,950 if you sort of stigmatize and isolate from society, 1400 01:05:53,950 --> 01:05:55,930 that might be bad for your mental health. 1401 01:05:55,930 --> 01:05:57,910 Particular, sort of relative comparisons 1402 01:05:57,910 --> 01:06:00,020 could be quite important. 1403 01:06:00,020 --> 01:06:02,020 And then at the same time, there are 1404 01:06:02,020 --> 01:06:03,640 effects in the other directions coming 1405 01:06:03,640 --> 01:06:06,800 from depression and anxiety. 1406 01:06:06,800 --> 01:06:10,420 So one profound way in which depression and anxiety affect 1407 01:06:10,420 --> 01:06:14,320 people's behavior is cognitive function, the way people think. 1408 01:06:14,320 --> 01:06:18,490 So in contrast to other things such as health, 1409 01:06:18,490 --> 01:06:21,910 depression and anxiety affect the way people think. 1410 01:06:21,910 --> 01:06:24,020 And then that might affect people's beliefs, 1411 01:06:24,020 --> 01:06:25,810 their confidence, overconfidence, 1412 01:06:25,810 --> 01:06:27,580 underconfidence, belief updating, 1413 01:06:27,580 --> 01:06:30,220 all the stuff that we talked about in the class as well 1414 01:06:30,220 --> 01:06:33,040 as their preferences, and time preferences, risk preferences, 1415 01:06:33,040 --> 01:06:35,150 social preferences, and so on. 1416 01:06:35,150 --> 01:06:38,290 It might affect their labor productivity, their labor 1417 01:06:38,290 --> 01:06:41,260 supply, how much people work, and how productive they are. 1418 01:06:41,260 --> 01:06:44,770 Of course, people might be very stigmatized and treated 1419 01:06:44,770 --> 01:06:51,670 badly because of mental illness, which in addition sort of then 1420 01:06:51,670 --> 01:06:55,030 makes people less likely to seek help potentially. 1421 01:06:55,030 --> 01:06:56,783 Because if you're then stigmatized, 1422 01:06:56,783 --> 01:06:58,700 you might not want to declare to your employer 1423 01:06:58,700 --> 01:07:01,690 or to anybody else that you're depressed. 1424 01:07:01,690 --> 01:07:05,710 People tend to have worse health conditions if they're depressed 1425 01:07:05,710 --> 01:07:09,110 or they suffer from mental illness or other health 1426 01:07:09,110 --> 01:07:12,390 conditions tend to get worse, health expenditures. 1427 01:07:12,390 --> 01:07:14,970 There's also some evidence of depression 1428 01:07:14,970 --> 01:07:17,220 affecting women's empowerment. 1429 01:07:17,220 --> 01:07:20,500 I think there's two potential channels here. 1430 01:07:20,500 --> 01:07:23,670 One is that women are, in fact, disproportionately affected 1431 01:07:23,670 --> 01:07:26,710 by depression, anxiety, and so on. 1432 01:07:26,710 --> 01:07:29,430 So the measured prevalence is about twice 1433 01:07:29,430 --> 01:07:32,790 as high and sort of to the extent that now, 1434 01:07:32,790 --> 01:07:37,160 if you improve people's mental health, 1435 01:07:37,160 --> 01:07:40,053 women will disproportionately benefit from that. 1436 01:07:40,053 --> 01:07:41,720 And then there's evidence that, once you 1437 01:07:41,720 --> 01:07:44,630 do that, women have higher bargaining 1438 01:07:44,630 --> 01:07:50,070 power in the household, more say about resources spent 1439 01:07:50,070 --> 01:07:52,170 and so on and so forth. 1440 01:07:52,170 --> 01:07:54,440 And then finally, potentially quite important 1441 01:07:54,440 --> 01:07:56,480 is effects on young people. 1442 01:07:56,480 --> 01:07:59,900 This ranges from primary and secondary school 1443 01:07:59,900 --> 01:08:03,330 age to college students and so on, 1444 01:08:03,330 --> 01:08:08,180 which is to say that a lot of mental health conditions 1445 01:08:08,180 --> 01:08:09,920 appear during adolescence. 1446 01:08:09,920 --> 01:08:12,800 And so those are often when very critical decisions are made 1447 01:08:12,800 --> 01:08:14,142 when it comes to education. 1448 01:08:14,142 --> 01:08:15,225 Do you drop out of school? 1449 01:08:15,225 --> 01:08:18,229 Do you go to college and so on and so forth? 1450 01:08:18,229 --> 01:08:21,050 It turns out there's actually quite not 1451 01:08:21,050 --> 01:08:22,729 a lot of causal evidence on this, 1452 01:08:22,729 --> 01:08:26,840 but it seems very plausible that this could be quite important. 1453 01:08:26,840 --> 01:08:28,620 And sort of taking these things together, 1454 01:08:28,620 --> 01:08:31,310 it seems to be that poverty, through various different 1455 01:08:31,310 --> 01:08:33,950 channels, including scarcity, which I showed you 1456 01:08:33,950 --> 01:08:35,870 at the beginning, but also including 1457 01:08:35,870 --> 01:08:38,450 all these other conditions might affect profoundly 1458 01:08:38,450 --> 01:08:41,180 the [INAUDIBLE] and how they make decisions 1459 01:08:41,180 --> 01:08:43,490 and how productive they are at work, which then could 1460 01:08:43,490 --> 01:08:46,520 reinforced poverty and make it harder 1461 01:08:46,520 --> 01:08:49,401 for people to become richer. 1462 01:08:49,401 --> 01:08:50,609 This is a lot of information. 1463 01:08:50,609 --> 01:08:52,080 So any questions? 1464 01:08:52,080 --> 01:08:54,859 I'm happy to discuss or answer any questions 1465 01:08:54,859 --> 01:08:55,819 that you would have. 1466 01:08:55,819 --> 01:08:58,430 I'm not expecting you to remember all of those things. 1467 01:08:58,430 --> 01:09:00,350 I was just more elaborating for anybody 1468 01:09:00,350 --> 01:09:01,740 who might be interested. 1469 01:09:01,740 --> 01:09:05,683 You can also read all of those things in the paper 1470 01:09:05,683 --> 01:09:07,800 that I'll add to the course website as well. 1471 01:09:22,310 --> 01:09:25,520 All right, so on Wednesday, we're 1472 01:09:25,520 --> 01:09:28,310 going to talk about happiness and mental health. 1473 01:09:28,310 --> 01:09:30,859 Please read the paper by Kahneman and Deaton. 1474 01:09:30,859 --> 01:09:32,760 Notice I just changed this in the syllabus. 1475 01:09:32,760 --> 01:09:34,203 So if you have an old version of the syllabus, 1476 01:09:34,203 --> 01:09:35,870 please make sure you read the new paper. 1477 01:09:35,870 --> 01:09:39,250 I think it was very short, so it shouldn't be tricky to read. 1478 01:09:39,250 --> 01:09:42,800 Essentially, it's looking at what kinds of things 1479 01:09:42,800 --> 01:09:46,770 predict whether people are happy or not. 1480 01:09:46,770 --> 01:09:50,500 And then on Monday, we're going to talk about policy 1481 01:09:50,500 --> 01:09:53,740 with behavioral agents. 1482 01:09:53,740 --> 01:09:56,380 Just as a reminder, we have a guest 1483 01:09:56,380 --> 01:09:58,370 at the end of class next time. 1484 01:09:58,370 --> 01:10:00,290 I hope the guests will come at 2:20. 1485 01:10:00,290 --> 01:10:04,780 I'm hoping for a lama to visit us, 1486 01:10:04,780 --> 01:10:06,100 but it could also be a goat. 1487 01:10:06,100 --> 01:10:08,590 We'll see how that goes. 1488 01:10:08,590 --> 01:10:10,963 Any questions or comments? 1489 01:10:10,963 --> 01:10:12,630 When it comes to depression and anxiety, 1490 01:10:12,630 --> 01:10:14,922 specifically I'm going to talk about it more generally. 1491 01:10:14,922 --> 01:10:17,560 So one of the things I'm working on, for example, 1492 01:10:17,560 --> 01:10:21,780 is looking at the impact of cognitive behavioral therapy 1493 01:10:21,780 --> 01:10:25,410 or other psychotherapies to improve people's mental health 1494 01:10:25,410 --> 01:10:28,770 and then look at the effects on people's beliefs, how 1495 01:10:28,770 --> 01:10:31,350 confident are they in themselves, 1496 01:10:31,350 --> 01:10:32,820 how they update their beliefs. 1497 01:10:32,820 --> 01:10:36,000 And remember, we have this stuff from [INAUDIBLE] and others 1498 01:10:36,000 --> 01:10:39,270 about asymmetric belief updating and is 1499 01:10:39,270 --> 01:10:42,630 that affected, for example, by people's mental health. 1500 01:10:42,630 --> 01:10:44,190 Moreover, we look at preferences, 1501 01:10:44,190 --> 01:10:45,960 which is precisely time preferences, 1502 01:10:45,960 --> 01:10:48,240 social preferences, risk preferences. 1503 01:10:48,240 --> 01:10:52,110 And once you improve people's depression, 1504 01:10:52,110 --> 01:10:57,240 does that affect people's time social and risk preference? 1505 01:10:57,240 --> 01:11:00,500 More broadly, there's quite a few people trying to do 1506 01:11:00,500 --> 01:11:03,110 studies-- and I'll run through this fairly quickly-- 1507 01:11:03,110 --> 01:11:07,960 to look at these types of effects, which, for example, 1508 01:11:07,960 --> 01:11:09,710 there's some work around malnutrition that 1509 01:11:09,710 --> 01:11:12,980 shows, once you provide people with more calories, 1510 01:11:12,980 --> 01:11:18,510 there's some indications of less discounting, which is kind 1511 01:11:18,510 --> 01:11:22,680 of what you're alluding to. 1512 01:11:22,680 --> 01:11:24,360 There's some work on the relationship 1513 01:11:24,360 --> 01:11:25,655 between stress and discounting. 1514 01:11:25,655 --> 01:11:27,780 There's actually not much evidence or less evidence 1515 01:11:27,780 --> 01:11:29,160 than you would expect. 1516 01:11:29,160 --> 01:11:31,500 For sleep deprivation, for example, we find, 1517 01:11:31,500 --> 01:11:35,058 when people nap, they're less present biased compared 1518 01:11:35,058 --> 01:11:36,225 to when they haven't napped. 1519 01:11:39,530 --> 01:11:41,290 For example, for alcohol consumption, 1520 01:11:41,290 --> 01:11:42,700 I do find that people save more. 1521 01:11:42,700 --> 01:11:44,960 And it seems to be not driven by having more money. 1522 01:11:44,960 --> 01:11:47,440 So again, that seems to be consistent with people's time 1523 01:11:47,440 --> 01:11:50,830 preference in some way affected by these conditions. 1524 01:11:50,830 --> 01:11:52,990 Overall, there's quite a bit of evidence 1525 01:11:52,990 --> 01:11:55,820 so far on productivity. 1526 01:11:55,820 --> 01:11:58,630 So papers essentially show that, when you're disproportionately 1527 01:11:58,630 --> 01:12:02,980 exposed to heat, people are less productive. 1528 01:12:02,980 --> 01:12:03,970 People learn less. 1529 01:12:03,970 --> 01:12:06,590 When you're exposed to noise, people are less productive. 1530 01:12:06,590 --> 01:12:09,370 When people have less nutrition, they're 1531 01:12:09,370 --> 01:12:12,500 less productive and so on and so forth. 1532 01:12:12,500 --> 01:12:16,000 There's less evidence, so far, on decision making and sort 1533 01:12:16,000 --> 01:12:17,410 of preferences overall. 1534 01:12:17,410 --> 01:12:19,377 That's what people are currently working on, 1535 01:12:19,377 --> 01:12:20,710 but that's exactly the question. 1536 01:12:20,710 --> 01:12:23,380 Can we sort of explained potentially some of this stuff 1537 01:12:23,380 --> 01:12:26,000 that I was mentioning at the very beginning of the lecture? 1538 01:12:26,000 --> 01:12:29,080 Can we explain potentially certain behavioral biases 1539 01:12:29,080 --> 01:12:32,350 or certain deviations from the neoclassical model 1540 01:12:32,350 --> 01:12:36,690 by alleviating or addressing some of the psychological 1541 01:12:36,690 --> 01:12:37,510 [INAUDIBLE]? 1542 01:12:37,510 --> 01:12:39,910 We don't have a lot of evidence, but we hope 1543 01:12:39,910 --> 01:12:44,030 to have some more [INAUDIBLE]. 1544 01:12:44,030 --> 01:12:47,050 But that's exactly what people are working on.