ECONOMISTS are familiar with the concept that taking concrete steps, such as funding development projects or social services, can lead to improved outcomes. However, the connection between psychotherapy, pharmaceutical treatments, and wealth accumulation is a relatively new area of economic research. The question remains: can improving mental well-being help people become wealthier?
This new branch of economic research is particularly significant for development economics where people in poor countries may be more likely to suffer from trauma due to war, violence, food scarcity, or natural disasters. Psychological interventions have shown potential to be effective tools for economic self-improvement.
A study in Ethiopia focused on the psychological impact of raising aspirations. The researchers conducted a randomized control trial, showing one group of people short films about business and entrepreneurial success in the community. Six months later, those individuals had seen the films had worked more, saved more, and invested more in education. The positive effects were still evident five years later as households that had seen the films had more accumulated wealth, with their children receiving more education on average.
In Mexico, an aspirational video presented to female microenterprise owners led to improvements in business performance. These positive changes were observed in a randomized control trial.
Certainly, intense versions of these treatments have the potential to be effective. While certain cultures, such as the overseas Chinese and Lebanese communities, are known for their entrepreneurial spirit, the question remains how effective a small dose of cultural influences can be.
While psychological interventions may produce temporary effects, such as a research project in India which taught self-efficacy lessons to women, leading to a 32% increase in employment in the short run, but the effects had dissipated within a year.
Psychotherapy has been prominent in the Western world, but its effectiveness is challenging to study in wealthier countries due to the cost and regulation. Nonetheless, some studies in lower- and middle-income countries have shown that psychotherapeutic treatments can improve work outcomes, including employment. Mental-health treatments for perinatally depressed mothers in Pakistan had significant positive effects on the children.
Antidepressants have also been shown to have positive effects. In India, a study found that antidepressants combined with therapy and livelihood assistance had positive effects for women, reducing depression rates and leading to greater investment in their children.
While these results do not prove the existence of a “psychology of poverty” that can be overcome by external interventions, they do suggest that investing in psychological and psychotherapeutic infrastructure in poorer economies can lead to marginal gains. Making therapeutic help more accessible and affordable can benefit people, fostering a culture where seeking help is encouraged.
Culture plays a crucial role in economic development, and smaller-scale cultural interventions can contribute to moving people in the direction of having a more aspirational ethos.
As for the United States, it remains unclear whether the country’s abundance of psychotherapeutic ideas, aspirational videos, and antidepressants may lead to marginal increases making little difference. However, from an economic standpoint, being open to psychological and pharmaceutical interventions can be more beneficial than less. — Bloomberg
Tyler Cowen is a professor of economics at George Mason University and host of the Marginal Revolution blog.
