It’s often said that a chain of bad decisions can lead people to be poor. That is undoubtedly true in some cases. (Think of the highly paid superstar athlete who later declares bankruptcy.) But Shafir and Mullainathan argue convincingly that we’ve got the causation backward: that in fact it’s poverty that leads to short-sighted financial decisions. As the authors write, scarcity “makes us less insightful, less forward-thinking, less controlled. And the effects are large.
