One major challenge of the scientific research on poverty is to explain its persistence. Why is it the case that so many people still live in non-decent living conditions, in spite of the efforts and budgets spent on poverty alleviation in the last decades? One common concept used to study poverty persistence is that of the poverty trap. People are caught in a poverty trap if the conditions in which they live force them to some extent to make choices that prevent them from escaping from poverty.
Many different types of poverty traps, economic or psychological, are studied. In a fascinating paper, Johannes Haushorfer reviews evidence to make the point that there might exist neurobiological poverty traps. The idea is that experiencing poverty has the following consequences. In a first step, it affects the poor person’s physiology. In a second step, physiological changes modify that person’s way of taking decision. In a third step, these decision-taking processes push the person towards reproducing low-level living conditions.
One example of such a sequence of mechanisms deals with cortisol. Cortisol is the human body’s main stress hormone. It is produced in situations of physical and psychological stress. It helps react to stress situations in the short run. If it is too abundant in the body, it may become physiologically damaging. Poverty traps mechanisms might come from the excess of cortisol that is produced by the stress inherent to a long-lasting experience of poverty.
We may distinguish three bodies of evidence. In the first body of evidence, it is shown that rich people have lower levels of cortisol than poor people. At this point, it is no more than evidence of correlation, and it is impossible to conclude whether poverty increases cortisol or cortisol pushes people towards poverty.
In the second body of evidence, it is shown that children living in poor households also have larger levels of cortisol than other children. This tends to exhibit a causal effect, since it is impossible that children’s level of cortisol explains why their family is poor.
In the third body of literature, researchers have identified relationships between one’s level of cortisol and one’s way of taking decisions. In particular, high levels of cortisol seem to exacerbate the so-called reflection effect, which consists in increasing one’s aversion to risk in situations of choices among gains, and decreasing one’s aversion to risk in situations of choices among losses. As a consequence, a person with a higher level of cortisol is more likely to miss an opportunity to improve his material situation, and he is more likely to make a choice that will yield a very bad outcome in difficult situations.
Much more research is needed, especially to check for true causal relationship between poverty and those neurobiological characteristics, and to measure the possible magnitude of neurobiological effects on poverty traps.
The author does not draw any policy conclusion from his inquiry. It is clear that much more needs to be understood before this research leads to precise policy recommendations. Nevertheless, we see that the already available evidence points out towards breaking the sequence of mechanisms that lead to these poverty traps, and this should be done as early as possible, by directing policies towards minimizing the experience of stress of children in poor families.