Towards a Psychology of Poverty Traps

One concern that comes with considering depression or aspirational thinking as poverty trap mechanisms is the possibility this opens up for one to blame the poor for the situations in which they find themselves; i.e. it is tempting to shift from considering the poor as trapped by outside constraints (such as market failures) to considering the poor as trapped by their own negative thinking. However, as pointed out by several scholars during the workshop, it is much more productive to think about the sort of physiological interventions suggested by these mechanisms as compliments to, rather than substitutes for, traditional interventions. If project implementers and project evaluators take account of not just the common external constraints (e.g. lack of access to credit) but also the emerging internal constraints as discussed in this session (e.g. aspirations), then we may begin to have a greater impacts and/or gain better understanding of the limitations of our interventions.

That is Kibrom Tafere Hirfrfot and Liz Bageant in a recent Economics That Really Matters blog post recapping the recent NBER Conference on The Economics of Asset Dynamics and Poverty Traps.

I wholeheartedly agree with this sentiment. Simply suggesting that the poor should try harder is the wrong conclusion to draw from the emerging research on the psychology of poverty, hope, and aspirations in developing countries. Other than adding psychological components onto traditional interventions, a rather obvious policy implication of this research seems to be to create an expanded role for clinical psychologists (particularly child psychologists) within development programs.

The two papers presented at the NBER Conference about this topic strike me as important for development economists to consider. Jonathan de Quidt and Johannes Haushofer’s paper on depression develops an illustrative model of why economists should consider how depression impacts human behavior and economic outcomes. Travis Lybbert and Bruce Wydick’s paper on the economics of hope (a paper I’ve mentioned many times already) makes, in my mind, a very important contribution in showcasing the potential power of hope and aspirations. 

Frequent readers of this blog will know that I’ve been thinking a lot about the psychology of poverty over the last year or so. Because of this, it is encouraging that researchers much more established than myself are bringing legitimacy to this line of scientific inquiry. I’ve come to the conclusion that a more complete understanding of the real-life psychological impacts poverty inflicts on people will allow for more effectively designed policies.

Additionally, this research seems to extend beyond narrow application in developing countries and into other important topic areas such as refugee resettlement policies and racial justice policies in developed countries.

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