Consequences of poverty on economic decision-making: Assessing the verisimilitude of the cognitive mechanism

Abstract

The paper aims to assess the verisimilitude of the hypothesized model of poverty perpetuation linking socioeconomic situation and economic preferences via cognitive load, executive functions, and intuitive/deliberative decision-making style. The proposed model as a whole has not found required support in data, and simultaneously, the dyadic relationships between the variables have been mainly weak. Sensitivity analysis has revealed that the majority of the observed estimates varies substantively depending on the arbitrary analytic decisions of the researcher. The findings could be primarily attributed to (1) the possibility that the nature of economic preferences resembles stable personality traits and hence the preferences are only weakly determined by cognitive dispositions or patterns of emotional/cognitive responses in a long run; (2) the high social equality and relatively low poverty rate in Slovakia, which currently allows the majority of the inhabitants to afford elementary goods and meet the basic needs, regardless of their economic situation; (3) the fact that the current state of knowledge in behavioral sciences is burdened by multiple problems (e.g., lack of good theory, complicated issue of causality, prevalence of questionable research practices, or publication bias), resulting into poor replicability and low credibility of the knowledge, implies that the theories upon which the model was built might not necessarily be true. The hypothesized cognitive mechanism does not allow to explain what economic decision-making depends on, neither why do people fall into poverty traps.