People often assume that the poor are less competent than the wealthy. But my colleagues and I have recently found that the poor outperform the rich at some financial decisions. Under poverty, people develop a unique expertise.Why the Poor See Financial Decisions More Clearly
Paper Some Consequences of Having Too Little
Poor individuals often engage in behaviors, such as excessive borrowing, that reinforce the conditions of poverty. Some explanations for these behaviors focus on personality traits of the poor. Others emphasize environmental factors such as housing or financial access. We instead consider how certain behaviors stem simply from having less. We suggest that scarcity changes how people allocate attention: It leads them to engage more deeply in some problems while neglecting others. Across several experiments, we show that scarcity leads to attentional shifts that can help to explain behaviors such as overborrowing. We discuss how this mechanism might also explain other puzzles of poverty.
Published in: Science
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- Economic Mobility