Having studied Economics at A level, I was intrigued to learn that human behaviour does not always follow the logical predictions of neo-classical models. I was perplexed as to why it was such an anomaly and so decided to do some further reading in the hope of gaining a greater understanding as to why people do not always seemingly act rationally and hence why their decisions cannot always be predicted with certainty.
‘Poor Economics’ by Banerjee and Duflo explained to me the reasoning behind many seemingly illogical decisions made by the poor. For example, previously had I been asked whether bed nets which prevent malaria should be given out for free, knowing not everyone who is at risk sleeps under a net, I would have instantly said yes they should without thinking twice. However, Economics has changed the way I look at problems and encouraged me to think deeper before forming an opinion. I am now inclined to question the situation rather than making assumptions. In this case I learnt that due to information failure some people are unaware of the extensive benefits of nets not jus...
In chapter three Isbister explains that social scientists wrestled to justify conditions in the third world, as a result, a mixture of indefinite theories developed. A point often overlooked, by social scientists is that the struggle and growth of Asia, Africa, and Latin America cannot be measured “in statistics, nor in treatises of social scientists and historians.” After reading the chapter, an obvious conclusion stood out poverty is tangible for most of the world’s people and nations. Why is this and who is to blame? Are the poor people to be blamed for their own poverty? The answers are arranged into three different groups: mod¬ernization, dependency, and Marxism.
Understanding how people arrive at their choices is a field of cognitive psychology. Theories have been tested to explain how people get influenced while making decisions in the present and future. Heuristics1 have been researched to understand the decision making process.
The Rational expectations model was developed by Robert Lucas,rational economic agents are assumed to make the best of all possible use of all publicly available information. Before reaching a conclusion, people are assumed to consider all available information before them, then make informed, rational judgments on what the future holds. This does not mean that every individual’s expectations or predictions about the future will be correct. Those errors that do occur will be randomly distributed, such that the expectations of large numbers of people will average out to be correct.
Most people of the society still blame the poor for their own predicament. They believe that "if there is a will there is a way". However, they do not think about their government that might had made bad decisions and policies that could actually harm successful development. This causes of poverty and inequality are usually less discussed and often neglected. We must recognize the effects poverty could have on the society and seek ways to create better understanding and resolve the issue before it is too late.
Rational choice theory, developed by Ronald Clarke and Derek Cornish in 1985, is a revival of Cesare Becca...
3) Game theory assumes consumers would make rational decisions, but as we all know, feelings often disrupt our rational decision-making processes, often resulting in irrational choices that we perceive as satisfying.
The overriding challenge Uganda faces today is the curse of poverty. Poverty, ‘the lack of something”(“Poverty.”), something can be materials, knowledge, or anything one justifies as necessary to living. Associated with poverty is the question of what causes poverty and how to stop poverty? The poverty rate in Uganda has declined from the year 2002 from the year 2009, which shows the percent of residents living in poverty has decreasing. Yet, the year is 2014 and the poverty rate could have drastically changed over the course of five years. One could assume the poverty rate would continue to decrease, which would be astounding and beneficial, but does poverty ever decrease enough to an acceptable level or even nonexistence? Poverty is a complex issue that continues to puzzle people from all across the globe. Poverty could possible be a question that is never truly answered.
Contradiction is the nature of the society. If there is a religion, there will be those who do not believe. If there is a war, there will be those that want peace. If there is a political movement, there will be those that disagree. Humans are bound to go against their own believes, their own strategies, and their own establishments. Nothing is forever. History portrays people going against the accepted ideologies. It shows the everlasting change of the society. First, they thought that God was the explanation to everything. A century later, they started doubting the Bible. The period of Enlightenment embraced rationality. People believed that they could explain anything, either through science or through religion. They believed in the capability of their own specie. In 19th and 20th century, that stable rationality of the human beings was rejected. The phrase "man is a rational animal" turned into "man is weak and inconsistent." One would agree that the abandonment of the confident human rationality in the 19th and 20th century would be best pictured through psychology and biology.
...s extreme poverty that we contribute to, then we are at least partially responsible for its alleviation. As a consequence, we do owe an effective and changing solution. In recognising responsibility we now need to find solutions and do our part to stop the phenomenon of poverty destroying more innocent lives. The question is now whether affluent states do have the ability to make those changes. Pogge, whilst continually advocating minor changes and simple solutions in the two papers, does not actually suggest the mechanisms of any. As a consequence, more thought needs to be given to the possible solutions that can alleviate global poverty and eliminate our debt to the poor. This however, does not justify continued imposition of the problem. Just like if a builder is incapable of fixing leak he would hire help, so too must society look to find an adequate solution.
Collier, Paul. The Bottom Billion: Why the Poorest Countries Are failing and What Can Be Done about It. Oxford: Oxford UP, 2007. Print.
Since then economists have looked at alternative theories to explain and predict the real world dynamics. This is where the behavioral economics comes in. Among other things, it seeks to explain why humans behave how they behave, what are the impacts of this in the economy (here we are particularly concerned with financial markets), how we can avoid various biases to make better investment decisions.
Gans (1971) stated in modern society there are few events that can be considered functional or dysfunctional for society, and that most events result in benefits to some groups, while they present a cost to other groups. Poverty provides a great example of the negative impact on one group of society while providing benefits to another group in society. “All human endeavors have benefits and costs, material and nonmaterial, and that most such endeavors produce benefits for some people and groups and reparations for others. Even some of the most costly social evils benefit someone” (Gans, 2012). Poverty provides numerous benefits for the wealthy. However, the poor can also benefit from the wealthy.
Poverty, also known as the silent killer, exists in every corner of the world. In fact, almost half of the world’s population lives in poverty. According to the United States Census Bureau, there were 46.7 million people living in poverty the year of 2014 (1). Unfortunately, thousands of people die each year due to this world-wide problem. Some people view poverty as individuals or families not being able to afford an occupational meal or having to skip a meal to save money. However, this is not the true definition of poverty. According to the author of The Position of Poverty, John Kenneth Galbraith, “people are poverty-stricken when their income, even if adequate for survival, falls radically behind that of the community”, which means people
For instance, when the price of Coca-Cola goes up, people drink more Pepsi. It is logical. And for the same reason, when laws are hardened and penalties are higher, crime decreases; as logical as a worker incentive in exchange for results, try harder. These behavioral changes can be explained from economic theories, and not because they have to do with the money but because economics is the study of rational behavior and rational people respond to rewards and stimuli. When the costs or benefits of some change, people change their behavior. But, could you move this simple theory to all areas of our lives? Sex, society, war, love, racism, labor relations, politics or the
In conclusion, sometimes actions take place that changes a person’s outlook on life and as you can see poverty is one that can have a huge effect on not only one person, but also the people around him/ her.