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Tue Jan 15, 2013, 04:52 PM

 

Life in the Red...In debt and digging deeper.

The usual explanations for reckless borrowing focus on people’s character, or social norms that promote free spending and instant gratification. But recent research has shown that scarcity by itself is enough to cause this kind of financial self-sabotage.

“When we put people in situations of scarcity in experiments, they get into poverty traps,” said Eldar Shafir, a professor of psychology and public affairs at Princeton. “They borrow at high interest rates that hurt them, in ways they knew to avoid when there was less scarcity.”

The psychological burden of debt not only saps intellectual resources, it also reinforces the reckless behavior, and quickly, Dr. Shafir and other experts said. Millions of Americans have been keeping the lights on through hard times with borrowed money, running a kind of shell game to keep bill collectors away. The average debt for households earning $20,000 a year or less more than doubled to $26,000 between 2001 and 2010, according to the Urban Institute. The averages for households in slightly higher brackets grew by 50 to 90 percent in the same period.



In one experiment, participants competed in rounds of the game “Family Feud,” a trivia contest in which each question allows for multiple guesses. One team was “poor,” allotted only 15 seconds per round; another was “rich,” having budgets of nearly a minute per round. Both groups could borrow time against future rounds, but the poor borrowed far more, progressively shrinking their future paychecks while the rich mostly avoided debt.

The research team, which included Sendhil Mullainathan and Dr. Shafir of Princeton, demonstrated that same effect in a series of related experiments. Scarcity by itself — independent of personality or any other factors — fuels a drive to borrow recklessly.

http://www.nytimes.com/2013/01/15/science/in-debt-and-digging-deeper-to-find-relief.html?pagewanted=2&_r=0

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Response to dkf (Original post)

Tue Jan 15, 2013, 05:05 PM

1. What a pile of anti-working class bullshit

The 'burden of debt' promotes 'reckless behavior'

Really?

So Wall Street bankers turned the US into their personal, irresponsible, derivative sucking,money-grabbing casino because they were...in debt?

Wait, what?

No jobs + stagnate wages + high costs - viable safety net = You're Fucked Unless You're Born To Wealthy Parents

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Response to leftstreet (Reply #1)

Tue Jan 15, 2013, 05:09 PM

2. This should hardly be surprising considering the OP

Someone has compiled a rather lengthy list of posts by the OP, I'm sure this will get added to it.

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Response to leftstreet (Reply #1)

Tue Jan 15, 2013, 05:25 PM

4. These are research based studies explaining the psychology behind spiraling debt.

 

Scarcity itself drives it regardless of individual personality traits.

Anti-working class? What craziness is that? How in the world do you get there?

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Response to dkf (Reply #4)

Tue Jan 15, 2013, 07:12 PM

7. so being poor is not a character flaw

debt is a very human and expected response from people who are so impoverished that their very survival is at stake.

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Response to CreekDog (Reply #7)

Tue Jan 15, 2013, 07:13 PM

8. +100

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Response to dkf (Original post)

Tue Jan 15, 2013, 05:15 PM

3. People only have a certain amount of self control

When they expend self control in one area it takes away from their self control in other areas.

I can assure you that being poor in America requires a great deal of self control in many areas, often fighting against extremely sophisticated advertising campaigns specifically designed to circumvent the individual's self control, particularly by using emotional manipulation.

http://en.wikipedia.org/wiki/Self-control#As_a_limited_resource

Research by Roy Baumeister and colleagues has shown that people's ability to exert self-control depends on a strength-like resource that diminishes after use.

After participants performed a task requiring self-control, they were less able to exert self-control, even in entirely different areas; this result was replicated in over a hundred experiments

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Response to dkf (Original post)

Tue Jan 15, 2013, 06:55 PM

5. Gee! Color me surprised ...

Eating today trumps maybe having more to eat tomorrow! Borrowing at a high rate (the only rate available to me) to keep the lights and heat on today trumps maybe being able to get a better deal tomorrow.

I think Maslow had something to say on this topic.

I agree mor "the poor are stupid" stuff.

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Response to dkf (Original post)

Tue Jan 15, 2013, 07:00 PM

6. Because keeping the power on and the kids warm is SOOOOOO reckless!



I say we KEEP paying substandard, crap, poverty wages to hard working Americans and teach those reckless people a lesson!

Why should we pay a living wage when they can't even keep track of the paltry sums we pay them?

And just CUT THEM off from medical care. Health Care should only be for HIGH INCOME workers and the lazy rich.

Keep those reckless fools poor AND sick and OUT OF OUR HOSPITALS. That'll learn 'em!


Gawd, does this hate-the-poor shit ever get old for you? Can't you find some other group to hate on for a day or two?


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Response to Tsiyu (Reply #6)

Tue Jan 15, 2013, 07:28 PM

10. I don't think that's what the OP had in mind

In this specific case at least the OP went out of their way to indicate that this type of behavior is not dependent on class, race or sexual orientation, it's pretty much universal in humans.

Ever see that movie Trading Places?

It speaks exactly to the point in the OP, take the rich person and put them in the poor person's shoes and they'll start acting like poor people do.

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Response to Fumesucker (Reply #10)

Tue Jan 15, 2013, 07:40 PM

12. We'll have to agree to disagree on intent of OP





People are truly struggling out there. Wages are a joke, no health care so even one serious illness means people are losing their homes, millions unemployed or under-employed ( I am one ) and we want to do studies to show that poor people have to rob Peter to pay Paul?

I'm just sick of our society's demonizing poverty at a faster rate than we create poverty. We need living wages, single payer and higher taxes on the wealthy. Corporations like General Electric need to pay taxes AND be penalized for taking jobs out of the country.

Instead, we want to "do studies" on poor people? How goddamned petty and wasteful can we get here?

Here's the number one "study" I've produced:

Make the bloated wealthy pay their fair share, make businesses pay people a living wage, instate single payer health care plans, stop waging exhorbitantly-funded wars on the harmless habits of the poor and on brown people with oil, but wage war on Wall Street criminals instead, and most of our problems will disappear!





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Response to Tsiyu (Reply #12)

Tue Jan 15, 2013, 08:11 PM

13. Being one of those poor people I understand better than I'd like to sometimes :-)

And I appreciate your support.

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Response to dkf (Original post)

Tue Jan 15, 2013, 07:18 PM

9. I would prefer someone who is poor have debt and live, than die avoiding it

i think that's how humans are supposed to think of each other.

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Response to dkf (Original post)

Tue Jan 15, 2013, 07:37 PM

11. As expected ...

... it points out what a load of rubbish the more main stream economists have been pushing: namely that poor people are not "rational" in choosing survival basics today at great cost. When the real choice is survive and go deeply into debt, or die with money in the bank, going into debt is the rational choice.

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