Capitalism, Poverty, and Meta-Opportunity Cost

Submitted by PerfectSociety in economics

Research shows that poverty has a massive negative impact on cognitive function. The most interesting study was one with sugarcane farmers in a particular part of India:

the team carried out IQ and attention tests on 464 sugar cane farmers in Tamil Nadu in India during cyclical conditions of relative wealth and poverty. Because of the long crop cycle for sugar cane, farmers tend to be poor just before a harvest and relatively well off a few weeks after the harvest, when they have received their annual crop earnings..."What we did is look at the same people the month before and the month after the harvest, and what we see is that IQ goes up, cognitive control, or errors, goes way down, and response times go way down," said Sendhil Mullainathan, a professor of economics at Harvard University and a co-author of the study. "The effect here is about two-thirds of the size of the effect found in the mall study – it's at least nine or 10 IQ points, just between these months. "Between these two studies, you both see the mechanism at work, and you see that, in the real world, these effects are enormous. In their study, the researchers controlled for possible mitigating factors such as stress, quality of nutrition, available time and also the fact that people can sometimes get better at cognitive tests once they have tried them out a few times.

This study is very interesting because it takes the same individuals and tests a few weeks before and after their harvest, finding a 9-10 point difference in their IQ.

This raises an interesting question: If the financial desperation of poverty results in a 9-10 point drop in a person's IQ, how much more could we accomplish in a socioeconomic system where everyone could comfortably meet their basic needs without having to prove their market value?

Obviously we can't definitively answer this question through the lens of just one factor, but it addresses a matter that I think is not discussed sufficiently - something I like to call "Meta-Opportunity Cost", which is the opportunity cost incurred by living under one type of socioeconomic system as opposed to another.

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