Princeton study reveals the true cause of poverty (and how to defeat it)

The poor tend to perpetuate their own misery by making poor decisions. When we look at the data, we see the poor borrow more, save less, smoke more, exercise less, drink more and eat less healthfully. Why?

Because of some personality defect?

No, and you’d be surprised to know the real reason.

And is there something that we can do to stop poverty and all its ills?

Yes, and a precedent on how to do this has already been established – unbelievably the evidence has been buried for a hundred years!

In his TED Talk Poverty isn’t a lack of character, it’s a lack of cash, historian Rutger Bregman, shares a provocative solution and a forgotten modern experiment where it actually worked — guaranteed basic income.

“It was only a few years ago that I discovered that everything I thought I knew about poverty was wrong. It all started when I accidentally stumbled upon a paper by a few American psychologists. They had traveled 8,000 miles, all the way to India, for a fascinating study,” Rutger tells his audience.

It was an experiment with sugarcane farmers who get about 60 percent of their annual income all at once, right after the harvest, which means that they’re relatively poor one part of the year and rich the other. The researchers let them do an IQ test before and after the harvest.

What they subsequently discovered completely blew Rutger’s mind.

The farmers scored much worse on the test before the harvest. The effects of living in poverty, it turns out, correspond to losing 14 points of IQ.

A few months later, Rutger had the opportunity to meet with Eldar Shafir, a professor at Princeton University and one of the authors of this study to talk about the revolutionary new theory of poverty that Shafir had developed: scarcity mentality. “It turns out that people behave differently when they perceive a thing to be scarce. And what that thing is doesn’t much matter — whether it’s not enough time, money or food.”

This plays out in all of our lives.

Rutger explains: “You all know this feeling, when you’ve got too much to do, or when you’ve put off breaking for lunch and your blood sugar takes a dive. This narrows your focus to your immediate lack — to the sandwich you’ve got to have now, the meeting that’s starting in five minutes or the bills that have to be paid tomorrow. So the long-term perspective goes out the window.

The poor have the same problem. They’re not making dumb decisions because they are dumb, but because they’re living in a context in which anyone would make dumb decisions.

George Orwell’s insight

Rutger reminds his audience that George Orwell, one of the greatest writers who ever lived, experienced poverty firsthand in the 1920s. Orwell had this to say about poverty:

“The essence of poverty is that it annihilates the future.”

So, basically people who live with chronic poverty are not able to think or plan long term. That is pretty understandable, but what if some of their immediate, pressing needs could be taken care of? Would that change the situation?

What would happen if we could afford everyone on earth a basic income guarantee? A monthly grant, enough to pay for basic needs: food, shelter, education, completely unconditional with no stigma attached — a right, not a favor.

This idea is more than 500 years old! The philosopher Thomas More first hinted at it in his book, “Utopia,” more than 500 years ago, and its proponents have spanned the spectrum from the left to the right, from the civil rights campaigner, Martin Luther King, to the economist Milton Friedman, says Rutger.

What’s more, it has been proven to work.

In 1974 in the small town Dauphin, Canada everybody was guaranteed a basic income, ensuring that nobody fell below the poverty line. For four years, all went well. But then a new government was voted into power, and the new Canadian cabinet saw little point to the expensive experiment and it was abandoned along with all the research data.  Twenty-five years later, a Canadian professor found the records, analyzed it and realized the experiment had been a huge success.

“The people in Dauphin had not only become richer but also smarter and healthier. The school performance of kids improved substantially. The hospitalization rate decreased by as much as 8.5 percent. Domestic violence incidents were down, as were mental health complaints.

“Similar results have since been found in countless other experiments around the globe, from the US to India.”

Basic income is much more than just another policy

Basic income is a complete rethink of what work actually is and it will not only free the poor, but also the rest of us, says Rutger.

As it is, millions of people feel that their jobs have little meaning or significance. How will we be able to afford a future where the value of your work is not determined by the size of your paycheck; where an existence without poverty is not a privilege but a right we all deserve?


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  1. mircea

    The guarantee basic income (alone) is not a solution to the poverty problem, at list like it is in Romania. It generated people (mostly low educated) with unwilling to work (at adequate qualification). Moreover, mobs relations are developing in the system, like everywhere where money is public. I think education is the key to the problem. I see no short time solution to poverty.

  2. Jorge Velazquez

    How is guaranteed income different than SNAP, CHIP, free cell phone, Section 8 vouchers, etc do I need to go on?
    Free money is NOT free! In any form or guise. Nobody gave me anything. If you saw the neighborhood I grew up in as a child you’d lock your doors and count your kids. You have to want to better yourself and cut the governmental umbilical cord.

  3. O Solheim

    This is one of the most nonsens thing ever read on the net. All of it.
    No argumentation needed, its too obvius.

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