A Behavioral Economics View of Poverty

Author: Marianne Bertrand, Sendhil Mullainathan, Eldar Shafir

Abstract:

Standard theorizing about poverty falls into two camps. Social scientists regard the behaviors of the economically disadvantaged either as calculated adaptations to prevailing circumstances, or as emanating from a unique “culture of poverty,” rife with deviant values. The first camp presumes that people are highly rational, that they hold coherent and justified beliefs and pursue their goals effectively, without mistakes, and with no need for help. The second camp attributes to the poor a variety of psychological and attitudinal short-fallings that render their views often misguided and their choices fallible, leaving them in need of paternalistic guidance.

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