"The sting of poverty" is interesting reading.
In the brief, the argument of Charles Karelis goes like this [1]:
In other words: the curve of utility has diminishing returns on the both ends. The difference between the utility of having $1000k and the utility of having $1001k is small; so does the difference between being $100k in debt and being $99k in debt. So you have little incentive to work for this extra $1k.
Strictly speaking, this behaviour isn't irrational: if you have this utility function and I have that utility function, then — provided that you consistently act according to your utility function — the most I can say is that I really dislike your life outcomes and find your actions suboptimal from the point of view of my preferences.
(similarly, if I've got a really low discount rate, you've got a really high discount rate, and both of us are asked to describe what's wrong with the lives of each other, then I'd tend to use words like "drinking problem" and "crippling drug addiction", and you'd tend to use words like "doesn't like fun", "in the long run we all are dead" and "YOLO".
On the other hand, if your discount rate is hyperbolic, then your preferences are dynamically inconsistent and so I can call you irrational)
But still. Probably the most poor would prefer having a nice house to having a gambling addiction, and they sometimes seem to regret their past choices. Also, hyperbolic discounting (which is irrational) is really common, seems to be relevant here, so maybe it's irrationality contaminates everything else.
And the shape in beginning totally looks like hyperbole, where present-me hopes that future-me will do something with my credit card debt, but future-me actually is too busy gambling away my retirement savings. Also, "I'm not going to cure this bee sting because there will still be another six left" totally looks like Nirvana Fallacy.
* * *
And, well, the same argument applies to other resource shortages: lack of time, lack of willpower, lack of mental energy.
And that's interesting: can we derive some sort of lifehack out of this? The reasoning above suggests that hyperbolic discounting seems somewhat connected to the scarcity mindset. So, could one become a better at planning by getting rid of this idea?
My ideas:
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[1] Disclaimer: I haven't read his book, and some guy on Quora claims that Karelis says that this reading is wrong while refusing to explain what exactly is wrong here. I don't know what I should do with this information, but now you know this too, and we can be confused together.
In the brief, the argument of Charles Karelis goes like this [1]:
A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems...
If, for example, our car has several dents on it, and then we get one more, we're far less likely to get that one fixed than if the car was pristine before. If we have a sink full of dishes, the prospect of washing a few of them is much more daunting than if there are only a few in the sink to begin with. Karelis's name for goods that reduce or salve these sort of burdens is "relievers."
In other words: the curve of utility has diminishing returns on the both ends. The difference between the utility of having $1000k and the utility of having $1001k is small; so does the difference between being $100k in debt and being $99k in debt. So you have little incentive to work for this extra $1k.
Strictly speaking, this behaviour isn't irrational: if you have this utility function and I have that utility function, then — provided that you consistently act according to your utility function — the most I can say is that I really dislike your life outcomes and find your actions suboptimal from the point of view of my preferences.
(similarly, if I've got a really low discount rate, you've got a really high discount rate, and both of us are asked to describe what's wrong with the lives of each other, then I'd tend to use words like "drinking problem" and "crippling drug addiction", and you'd tend to use words like "doesn't like fun", "in the long run we all are dead" and "YOLO".
On the other hand, if your discount rate is hyperbolic, then your preferences are dynamically inconsistent and so I can call you irrational)
But still. Probably the most poor would prefer having a nice house to having a gambling addiction, and they sometimes seem to regret their past choices. Also, hyperbolic discounting (which is irrational) is really common, seems to be relevant here, so maybe it's irrationality contaminates everything else.
And the shape in beginning totally looks like hyperbole, where present-me hopes that future-me will do something with my credit card debt, but future-me actually is too busy gambling away my retirement savings. Also, "I'm not going to cure this bee sting because there will still be another six left" totally looks like Nirvana Fallacy.
* * *
And, well, the same argument applies to other resource shortages: lack of time, lack of willpower, lack of mental energy.
And that's interesting: can we derive some sort of lifehack out of this? The reasoning above suggests that hyperbolic discounting seems somewhat connected to the scarcity mindset. So, could one become a better at planning by getting rid of this idea?
My ideas:
- Concentrate on goods, not problems. You aren't fixing a car dent: you are buying himself a piece of repaired car. No Nirvana Fallacy allowed.
- Little pieces are OK. It's OK to only wash one dish instead of every one of them. You're making your life better, one step at a time.
- Some sort of TDT-like reframing. When you are deciding if you will wash this plate or not, it is not about just this plate. It's about your behaviour in similar situations: the week worth of clean dishes is on the stake.
- Chop Big Thing into little manageable pieces which aren't too intimidating but still feel like accomplishment.
- It's better to completely eliminate one problem than to moderately relieve another: that way, you can completely cross one thing from your to-do-list, which maybe hopefully will make you feel less torn apart.
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[1] Disclaimer: I haven't read his book, and some guy on Quora claims that Karelis says that this reading is wrong while refusing to explain what exactly is wrong here. I don't know what I should do with this information, but now you know this too, and we can be confused together.
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