A Behavioral-Economics View of Poverty

By Marianne Bertrand, Sendhil Mullainathan, Eldar Shafir. 2004

550 citations recorded by the source corpus.

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. We propose a third view. The behavioral patterns of the poor, we argue, may be neither perfectly calculating nor especially deviant. Rather, the poor may exhibit the same basic weaknesses and biases as do people from other walks of life, except that in poverty, with its narrow margins for error, the same behaviors often manifest themselves in more pronounced ways and can lead to worse outcomes. In what follows, we illustrate the kinds of insights that might be gained from a behaviorally more realistic analysis of the economic conditions of the poor, and we propose that alternative policies for alleviating poverty be considered.

Subfields: Accounting, Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/8606686e32843669bdb34801790a2fecd912426c

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Citations in the corpus

Behavioral Economics and Marketing in Aid of Decision Making among the Poor (2006, background): “…weaknesses and biases that are similar to those of people from other walks of life, except that in poverty, there are narrow margins for error, and the same behaviors often manifest themselves in more pronounced ways and can lead to worse outcomes (see Bertrand, Mullainathan, and Shafir 2004).”
Welfare Payments and Crime (2011, background): “These types of behavioral effects call for distinctive public policy responses, as noted by Jolls (2007) and Bertrand, Mullainathan, and Shaﬁr (2004).”
Envirodevonomics: A Research Agenda for an Emerging Field (2015, background): “In developing countries, market failures undermine the feedback that helps individuals learn from their previous decisions and exacerbate standard behavioral biases (Bertrand et al. 2004).”
Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity (2013, background): “(1) and (3): Dependent variable = post-tax price (2) and (4): Dependent variable = post-tax price*income ∗ p < 0.”
Present-Biased Preferences and Credit Card Borrowing (2009, unknown): “5 financial risk (see, Bertrand et al., 2004).”
Subjective relative income and lottery ticket purchases (2008, background): “…tickets (LaFleur & LaFleur, 2003).1 Moreover, poverty creates ‘‘smaller margins of error’’ so that behaviors, such as playing the lottery, which have a negligible effect on the financial well being of middle class persons, can have a profound impact on that of a poor person (Bertrand et al., 2004).”
How social class shapes thoughts and actions in organizations (2011, background): “that lower-class individuals are aware of society’s norms and of their own inability to abide by them (Bertrand et al., 2004).”
Market inefficiencies and the adoption of agricultural technologies in developing countries 1 (2013, background): “Stigma is often cited as a contributor to low take-up in other contexts (Bertrand et al. 2004).”
Economic Decision-Making in Poverty Depletes Behavioral Control (2011, background): “Bertrand, Mullainathan, and Shafir (2004), Duflo (2006), and Hall (2008) all have recently proposed interactions between poverty and “behavioral” decision-making.”