Can We Blame Global Poverty on Pessimism?

What’s the Latest Development?

Living in poverty exacts a big mental tole but new research indicates that the positive effects of anti-poverty programs often go beyond their immediate material consequences. When MIT economist Esther Duflo investigated a micro-finance operation in the Indian state of West Bengal, she found that giving families “small productive assets”–a cow, a couple of goats or some chickens–benefited them beyond the milk, meat or eggs they could sell as a result. It turns out that recipients were working 28% more hours than before, mostly on projects unrelated to the assets they were given. 

What’s the Big Idea?

Duflo believes that micro-financing and other anti-poverty programs provide hope to the impoverished, which turns out to be a very powerful thing. The mental anguish of poverty leads many to believe they are stuck in a poverty trap when they are not. Because prosperity seems an impossibly distant goal to the impoverished, they often forgo incremental improvements they are capable of making: “a bit more fertiliser, some more schooling or a small amount of saving.” But when these incremental changes yield tangible dividends, families and individuals are encouraged to make more and more…

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