Downward Spiral of Debt - Old Science, New Application

Since the mind of a seven year old is incapable of cognitive dissonance, the New Your Times does not realize how this article refutes their editorial pronouncements.

Recent research has shown that scarcity by itself is enough to cause reckless borrowing. Debt causes borrowing in a downward spiral of self delusion and denial.

“When we put people in situations of scarcity in experiments, they get into poverty traps,” said Eldar Shafir, professor of psychology and public affairs at Princeton. “They borrow at high interest rates that hurt them, in ways they knew to avoid when there was less scarcity.” The psychological burden of debt not only saps intellectual resources, it also reinforces the reckless behavior, and quickly, Dr. Shafir and other experts said.

It is likely that the observed phenomena are less common among those who are mentally more mature. Unfortunately, my studies have shown that politicians are predominately more likely to be mentally similar to the self deluded borrower and less likely to be mathematical. Arrogance, self aggrandizement, magical thinking, and a false feeling of invulnerability define the political class, many who inherit wealth, and the poor.

Even mentally mature humans canbe entrapped in downward spirals of thinking and behavioral. For example, human factors engineers are familiar with the downward spiral of error where one mistake leads to another with increasing frequency. Such conditions lead to aircraft accidents and operator errors in a wide variety of conditions. High information rates, complexity, cognitive stress, emotional stress, and physical fatigue all lead to the decrease in intellectual resources and reckless behavior mentioned in the referenced article.

Poverty researchers have rediscovered a phenomenon well documented by engineering psychologists.

Too bad political scientists don't read more broadly.

Research popularized in this article.

Original Paper