Science. 2014 May 23;344(6186):862-7. doi: 10.1126/science.1232491.

On the psychology of poverty.

Haushofer J1, Fehr E2.

Author information

• 1Abdul Latif Jameel Poverty Action Lab, Massachusetts Institute of Technology, 30 Wadsworth Street, Cambridge, MA 02142, USA. Program in Economics, History, and Politics, Harvard University, Cambridge, MA 02138, USA. Department of Economics, University of Zürich, Blümlisalpstrasse 10, Zürich 8006, Switzerland. Department of Psychology and Woodrow Wilson School of Public and International Affairs, Princeton University, Princeton, NJ 08544, USA. joha@mit.edu ernst.fehr@econ.uzh.ch.
• 2Department of Economics, University of Zürich, Blümlisalpstrasse 10, Zürich 8006, Switzerland. joha@mit.edu ernst.fehr@econ.uzh.ch.

Abstract

Poverty remains one of the most pressing problems facing the world; the mechanisms through which poverty arises and perpetuates itself, however, are not well understood. Here, we examine the evidence for the hypothesis that poverty may have particular psychological consequences that can lead to economic behaviors that make it difficult to escape poverty. The evidence indicates that poverty causes stress and negative affective states which in turn may lead to short-sighted and risk-averse decision-making, possibly by limiting attention and favoring habitual behaviors at the expense of goal-directed ones. Together, these relationships may constitute a feedback loop that contributes to the perpetuation of poverty. We conclude by pointing toward specific gaps in our knowledge and outlining poverty alleviation programs that this mechanism suggests.