A Talk By Sendhil Mullainathan: He is a Professor of Economics at Harvard, a recipient of a MacArthur Foundation “genius grant”, conducts research on development economics, behavioral economics, and corporate finance. His work concerns creating a psychology of people to improve poverty alleviation programs in developing countries. He is Executive Director of Ideas 42, Institute of Quantitative Social Science, Harvard University.
I want to close a loop, which I’m calling “The Irony of Poverty.” On the one hand, lack of slack tells us the poor must make higher quality decisions because they don’t have slack to help buffer them with things. But even though they have to supply higher quality decisions, they’re in a worse position to supply them because they’re depleted. That is the ultimate irony of poverty. You’re getting cut twice. You are in an environment where the decisions have to be better, but you’re in an environment that by the very nature of that makes it harder for you apply better decisions.