Bran scans show economy is unfair
Scientific American is reporting on a an article in the journal Neuron that describes brain scanning experiments intended to see if poorer people react differently than richer people to opportunities to gain a little extra money.
The microeconomic law of diminishing marginal utility states that while accumulating a good—pretzels, pencils, nickels, whatever—each successive unit of that good will be less satisfying to acquire than the one before it. Finding a shiny quarter on the street is a real thrill. But, if you are carrying around a bag of coins, acquiring another one does not seem nearly as exciting. In fact, would you even bother to pick it up?
That hesitation is what researchers at the University of Cambridge in England were banking on when they designed a study to see if the haves catch on more slowly than the have-nots when it comes to reward-based learning. Reporting in the current issue of Neuron, the scientists reveal that when a small sum of money is on the line, poorer people learn quickly how to maximize their profits, leaving their wealthier counterparts in the dust.
By measuring response time, the researchers got a sense of how quickly people learned which one of the abstract pictures indicated money would follow. They noticed an inverse correlation between how much money a person had (assets and income) and the swiftness with which they were conditioned. The poorer people tended to figure out which card signaled money ahead within about 12 trials, says neurobiologist Philippe Tobler, the study’s lead author, whereas the richer people took about 35 trials.
Now if this is true, then it raises a simple and perennial question: why, in general, do poor people end up remaining poor over time while rich people end up remaining rich over time? We have here evidence that poor people’s brains function better with respect to learning how to gain an extra bit of money–at least in a situation of short-term, instantaneous gain. So that would suggest the average poor person will outperform the average rich person in making economic decisions, and so there should be a tendency for relative richness to average out in the middle. The world should consist almost entirely of a great mass of a middle class, with a few outliers. But it doesn’t. The world has a lot of people in the middle, a lot of people who are poor or very poor or unbelievably poor, and a relatively few number of people who are relatively rich. And all the amazing brain-scan-proven profit-maximizing capacity of those poor people can’t hold up a candle in the actual economy to the handfull of rich folks who have such enormous quantities of resources at their disposal. (See this image from this article.)
So maybe (and I’m going with the story here that what they’ve found is real, about which I do have some instinctual doubts) in situations where the gain is instantaneous, poorer people have the advantage of quicker reflexes. Street smarts, you might say. Panglossian pundits and economists might say that the rich stay rich because their brains are better suited to long-term strategizing that results in bigger rewards. Um… no. (Take that, straw man!)
The poor stay poor and the rich stay rich, in general, because it is not talent and skill and merit, of whatever sort, that leads to success in the economy. They play their part, for sure, but they are only some of the many factors. You know the others, some of them at least: race, sex, social networks, the political structure. (See Meritocracy and Economic Inequality)
I see that cactus over at Angry Bear is also onto this story, and he or she has some interesting thoughts, inspired by the Neuron article to recall the perverse incentives of the old European colonies.
Followup: title has been changed from “…unfree” to “…unfair” since that’s more accurate and what I meant to say.