For eradication of acute poverty, it is vital to factor in the human experience of it. Building social capital and networks that nurture, empower, and consistently reinforce a new shared economic identity can provide rich socioeconomic dividends. For states tackling extreme poverty at scale, building and strengthening social capital are essential public goods investments.

We consider the concept of poverty from the asset-accumulation approach and propose an integrated framework, building upon existing theories, to describe how the interconnected factors of trust (or lack thereof) and social distance can reinforce poverty traps. Social distance is influenced by choice, while trust is the symptom that defines the strength of social ties on a group. We look at how an absence of trust influences how households make decisions about the use and accumulation of assets in ways that (...) could perpetuate poverty. Weak trust also affects how groups interact with each other in a society, creating “trust clusters” within homogeneous groups and antagonism across groups, which in turn affects aspirations and leads to an erosion of the basis of a social contract. For more effective and sustainable poverty reduction, we need to understand these linkages and address them systematically. (shrink)

In recent years, the psychological causes and consequences of poverty have received renewed attention from scientists and policymakers. In this essay, we summarize new developments in this literature. First, we discuss advances in our understanding of the relationship between income and psychological well-being. There is a robust positive relationship between the two, both within and across countries, and in correlational and causal analyses. Second, we summarize recent work on the impact of “scarcity” and stress on economic preferences and decision-making. Our (...) view of this literature is that the evidence is relatively weak. Third, we summarize evidence on the impact of psychological interventions on economic outcomes. Light-touch psychological interventions, such as videos that aim to raise aspirations, have shown some promise in encouraging investment and improving economic well-being. Similarly, psychotherapy and pharmacological mental health treatments have positive effects on economic outcomes. Relative to the effects of cash transfers, these impacts are small in absolute terms and large in per-dollar terms. We conclude by discussing whether a psychological poverty trap is plausible. (shrink)

Until recently, economics conceived of poverty solely as a lack of material resources. This view likely captures the reality of poverty experienced by many people around the globe. However, two waves of behavioral economics demonstrate that the narrowing of people’s external environments may change people themselves: poverty lowers the quality of decision-making and poverty and oppression may depress the capacity to aspire. Poverty and a history of oppression also change how individuals are perceived. To overcome these effects may require helping (...) people acquire new mental models. This essay discusses key findings from behavioral economics, the implications for agency, and some interventions with promising outcomes. We hope to inspire scholars and policymakers to think more deeply about the nature of poverty and oppression and to consider policies that target the psychological and sociological factors that create cycles of poverty. (shrink)

This essay addresses tensions within political philosophy between group rights, which allow historically marginalized communities some self-governance in determining its own rules and norms, and the rights of marginalized subgroups, such as women, within these communities. Community norms frequently uphold patriarchal structures that define women as inferior to men, assign them a subordinate status within the community, and cut them off from the individual rights enjoyed by women in other sections of society. As feminists point out, the capacity for voice (...) and exit cannot be taken for granted, for community norms may be organized in ways that deny women any voice in its decision-making forums as well as the resources they would need to survive outside the community. This essay draws on research among the Gond, an indigenous community in India, to explore this debate. Given the strength of the forces within the community militating against women’s capacity for voice or exit, the question motivating our research is: Can external organizations make a difference? We explore the impacts of two external development organizations that sought to work with women within these communities in order to answer this question. (shrink)

The importance of economic freedom for economic development can no longer be denied. What is often denied, however, is respect for individuals’ rights and personal choices. The role of individual choice is often dismissed or set aside by the development community. In this essay, I argue that inherent to economic freedom’s economic success is the promotion and acceptance of individual choice. Development theory should include recognition of and respect for personal choices, a theory I call “Catfish Man of the Woods” (...) theory of development. (shrink)

As in other sciences, an economic experiment is an artificial situation created by a researcher for the purpose of answering one or more scientific questions. Experiments of various types are used in economics to understand the causes of poverty and how it might be alleviated. The methods can identify causal relationships between variables and thereby isolate factors that can lead to poverty as well as to document the behavioral consequences of poverty. Experiments can also be used to provide test beds (...) for proposed policies to alleviate poverty. This essay describes a variety of ways in which experiments have been employed to understand and combat poverty. A line of laboratory experiments that considers which economic institutions are conducive to economic growth is discussed in detail. The results show that decentralized markets are conducive to allowing an economy to operate as efficiently as it can. However, in an economy with a theoretical “poverty trap,” the market works more efficiently if accompanied by a democratic voting process and freedom of communication. (shrink)

A free world is one in which human beings can live free, self-directed lives. A great obstacle to such a world is severe poverty, still blighting the lives of half of humankind. We have the resources, technologies, and administrative capacities to eradicate severe poverty, but doing so requires some restructuring of existing social arrangements. We might begin with the current regime governing innovation, which has monopoly markups as its key funding source. Such monopoly rents encourage the quest for innovations, but (...) also greatly impede their diffusion. This headwind harms the poor, who cannot afford monopoly prices and whose specific needs innovators thus tend to ignore. It also works against potential innovations whose benefits would mostly go to third parties whom buyers care little about. Both problems can be much alleviated through a supplementary alternative reward mechanism that would enable innovators to exchange their monopoly privileges on any patentable technology for impact rewards based on the social benefits achieved with it. By promoting innovations and their diffusion together, international impact funds would bring substantial gains in justice and cost-effectiveness, especially in the pharmaceutical and green-technology sectors. (shrink)

This essay provides an account of four interrelated ideas. First, a person who is not poor by the standard conception of poverty can still be functionally poor. Second, poverty is a relationship between the poor and their environment (community, local markets, and local institutions). Third, poverty is a determinant of agency and impedes its exercise. Fourth, promoting agency promotes development. I conclude that agency is central to understanding both poverty and development.

Individuals with heavy paid and unpaid work burdens may experience time deprivations that restrict their well-being and put them at risk of becoming or remaining income poor. Because unpaid work outside of the market is not captured in most large survey-based datasets, time poverty is rarely recognized in policy and practice. Yet income poverty and time poverty are mutually reinforcing; they can sap energy and impede effective decision-making, thus perpetuating the state of poverty. This essay offers a five-step approach to (...) conceptualizing and measuring time poverty and it compares time poverty rates by gender across a range of developing countries. Results show that women have higher time poverty rates than men in most cases, with the main exception being countries with low rates of female labor force participation. Policies that strengthen physical and social infrastructure, thereby decreasing the time needed for unpaid household work, have demonstrable effects on reducing time poverty. (shrink)

Poverty can be an ephemeral life stage of a young person whose skill sets will become more valuable with training and experience, a personal setback such as losing a job, or a systemic affliction that puts a whole community in danger of widespread famine. A common theme of this volume’s essays is that we cannot understand poverty and famine unless we acknowledge that poor people are not mouths to be fed but agents. Amartya Sen got this right, crediting Adam Smith (...) for the seeds of his insight. What has been enabling people by the billions since Smith’s time to work their way out of poverty? (shrink)

This essay examines the many problems with public and private development aid and argues that global liberalization of trade and immigration would have a greater direct effect in reducing global poverty. It also examines and rejects the view that people in rich countries have a strong moral obligation to give to the global poor. Such an obligation is in tension with an ethic that prizes personal projects. A political morality of equal respect and concern is congenial not with foreign aid, (...) but with recognizing the agency of the global poor by lifting the many obstacles they currently face to participating in the market as producers and consumers. (shrink)