The Psychological Lives of the Poor.

There is growing interest in understanding the psychology of the poor—biases that may affect decision-making are of particular interest. The sheer diversity of potential biases—hyperbolic discounting, probabilistic, and judgmental errors just to name a few—poses a key challenge. These psychological biases cannot easily be put into a common unit such as money spent. However, two insights from psychology make this problem more tractable. First, a large body of work points toward a two-system model of the brain. System 1 thinks fast: it is intuitive, automatic, and effortless, and as a result, prone to biases and errors. System 2 is slow, effortful, deliberate, and costly, but typically produces more unbiased and accurate results. Second, when mentally taxed, people are less likely to engage their System 2 processes. Put simply, one might think of having a (mental) reserve or capacity for the kind of effortful thought required to use System 2. When burdened, there is less of this resource available for use in other judgments and decisions. Though there is no