The Effects Of Poverty Mindset On Economic Decision-making,and Their Psychological Mechanism

Poverty is one of the most pressing problems facing the world,which negatively affects the work,learning and life of the poor,impairs their well-being and physical health.More seriously,poverty threatens the harmony and stability of society and even causes conflict and violence.Therefore,"how to effectively help the poor to get rid of poverty"has become an urgent question to answer.Most of the traditional poverty alleviation policies are only based on economic considerations,providing material assistance to the poor,but paying little attention to the psychological and behavioral characteristics of the poor.Although the government has spent huge manpower and material costs on poverty alleviation,there are still a large number of poor people.Several studies published in SCIENCE believe that,in addition to the lack of material resources,the poor also have the characteristics of "psychological poverty",being unable to focus on long-term goals,and unable to make efficient economic decisions.In the long run,a vicious circle of"poverty—specific patterns of psychology and behavior-continuing poverty" would emerge.Therefore,it is necessary to fully consider the psychological and behavioral characteristics of the poor in the formulation and implementation of poverty alleviation policies.The poverty mindset(the feeling of lack of money)is the most basic psychological state of the poor.According to the scarcity theory,the poverty mindset not only automatically captures the attentional resources of the poor,making them difficult to suppress thinking the financial and cost issues,but also forces the poor to constantly weigh and concede between different needs,ultimately impairing their cognitive function and executive control.According to the scarcity theory,it can be inferred that the poverty mindset leads to people making inappropriate economic decisions-neglecting long-term interests(time discounts);and refueling to take necessary risks for greater returns(risk preference),but there is still no corresponding empirical research.Under the guidance of scarcity theory,the impact of poverty mindset on cognitive function and executive control was first verified in the Chinese sample(Pre-study);then the impact of poverty mindset on economic decision-making(Study 1),the mediating role of analytical thinking between poverty mindset and economic decision-making(Study 2)and the moderator role of the loss-gain frame in the mediation models(Study 3)were gradually examined.Pre-study 1 includes sub-study 1 and sub-study 2,in which the impact of the poverty mindset on cognitive function and executive control were examined by priming the poverty mindset,and found that when participants faced large-cost issues,the scores on the Raven’s Progressive Matrices test were significantly lower;after recalling the lack of money experience and enumerating the desires that were difficult to achieve due to lack of money,the performance of participants in the executive control test was significantly worse.The results obtained are basically consistent with previous studies,which verifies the applicability of the scarcity theory in the Chinese context and lays the foundation for the next study.Study 1,including sub-study 3 and sub-study 4,examined the impact of poverty mindset on intertemporal choice and risk decision-making through correlation and experimental methods.It is found that the poverty mindset leads the participants to prefer smaller immediate rewards in intertemporal choice tasks,and prefer smaller certain gain in risk decision tasks.The above research results show that poverty mindset leads to higher time discount rate and risk aversion tendency in economic decision-making.The delayed return option and the risk-reward option in the study are theoretically better options for absolute returns,and the poverty mindset causes the subjects to evade these options.It can be inferred that the poverty mindset is likely to lead people to make inappropriate economic decisions in daily lifeStudy 2 includes sub-study 5,sub-study 6,sub-study 7 and sub-study 8.First,sub-study 5 using correlation method examined the mediating role of analytical thinking between poverty mindset and economic decision-making.The results show that the mediation model is significant:the poverty mindset leads people to have higher time discount rate and risk aversion tendency in economic decision-making because poverty mindset damages people’s use of analytical thinking in economic decision-making process.Sub-study 6 and sub-study 7 examined the causal relationship between the two variables in the first half of the mediation model from both positive and negative aspects.It was found that the poverty mindset can significantly reduce the scores of the subjects in the Cognitive Reflection Test and increase the degree of dependence on intuitive thinking in the decision-making process.Sub-study 8 examined the causal relationship between the two variables in the second half of the model,and found that,when relying on intuition to make decisions,participants preferred the immediate reward options in intertemporal choice,and were more inclined to certain gain options in risk decision-ma:king.The four sub-studies consistently show that analytical thinking plays a mediating role between poverty mindset and economic decision-making,and that poverty mindset influences economic decision-making by reducing people’s analytical thinking.Study 3,including sub-study 9 and sub-study 10,from the perspective of intervention,examined the moderation role of the loss-gain frame on the relationship between poverty mindset and economic decision-making.Sub-study 9 found that moderation role of the loss-gain frame was significant:in the intertemporal choice of gain frame,the poverty mindset led to a higher time discount rate;in the intertemporal choice of loss frame,the impact of the poverty mindset on the time discount rate was not significant;in the risk decision-making of gain frame,the impact of poverty mindset on risk preference is not significant;in the risk decision making of loss frame,the poverty mindset leads to higher risk seeking tendency.Sub-study 10 further examined the moderation role of the loss-gain frame on the mediation models.It is found that the reason why the loss-gain frame can play a moderation role is that the loss-gain frame moderated the relationship between analytical thinking and economic decision-making.That is,poverty mindset impairs participants,analytical thinking,and the damaged analytical thinking would further affect participants’,response to intertemporal choice and risk decision-making,and loss-gain frame could change the impact of damaged analytical thinking on intertemporal choice and economic decision-making.Combining the above four studies and the results of previous studies,we can form a clearer understanding of the psychological and behavioral characteristics of the poor in economic decision-making.Poverty mindset consumes a large amount of cognitive resources and self-control resources.The impairment of cognitive function and executive control ability makes it difficult for people to make rational analysis when making economic decisions.Ultimately,relying on intuition would make it difficult in making appropriate economic decisions.Poverty mindset damages analytical thinking,which leads people to rely on intuition in decision-making.Taking loss-gain frame as a moderator could,to a certain extent,eliminate the negative effect of poverty mindset on economic decision,and help the poor make more reasonable and profitable economic decisions with the limited cognitive resources and self-control resources.