Community trust reduces myopic decisions of low-income individuals
Jon M. Jachimowicz, Salah Chafik, Sabeth Munrat, Jaideep C. Prabhu, Elke U. Weber
Princeton School of Public and International Affairs
Andlinger Center for Energy & the Environment
Why do the poor make shortsighted choices in decisions that involve delayed payoffs? Foregoing immediate rewards for larger, later rewards requires that decision makers (i) believe future payoffs will occur and (ii) are not forced to take the immediate reward out of financial need. Low-income individuals may be both less likely to believe future payoffs will occur and less able to forego immediate rewards due to higher financial need; they may thus appear to discount the future more heavily. We propose that trust in one's community-which, unlike generalized trust, we find does not covary with levels of income-can partially offset the effects of low income on myopic decisions. Specifically, we hypothesize that low-income individuals with higher community trust make less myopic intertemporal decisions because they believe their community will buffer, or cushion, against their financial need. In archival data and laboratory studies, we find that higher levels of community trust among low-income individuals lead to less myopic decisions. We also test our predictions with a 2-y community trust intervention in rural Bangladesh involving 121 union councils (the smallest rural administrative and local government unit) and find that residents in treated union councils show higher levels of community trust and make less myopic intertemporal choices than residents in control union councils. We discuss the implications of these results for the design of domestic and global policy interventions to help the poor make decisions that could alleviate poverty.
Temporal discounting
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Income Medicine & Life Sciences
Reward Medicine & Life Sciences
Local Government Medicine & Life Sciences
Bangladesh Medicine & Life Sciences
Poverty Medicine & Life Sciences
Buffers Medicine & Life Sciences
Jachimowicz, J. M., Chafik, S., Munrat, S., Prabhu, J. C., & Weber, E. U. (2017). Community trust reduces myopic decisions of low-income individuals. Proceedings of the National Academy of Sciences of the United States of America, 114(21), 5401-5406. https://doi.org/10.1073/pnas.1617395114
Jachimowicz, Jon M. ; Chafik, Salah ; Munrat, Sabeth ; Prabhu, Jaideep C. ; Weber, Elke U. / Community trust reduces myopic decisions of low-income individuals. In: Proceedings of the National Academy of Sciences of the United States of America. 2017 ; Vol. 114, No. 21. pp. 5401-5406.
@article{0a6073bacd6e4465854e0ebee26f4472,
title = "Community trust reduces myopic decisions of low-income individuals",
abstract = "Why do the poor make shortsighted choices in decisions that involve delayed payoffs? Foregoing immediate rewards for larger, later rewards requires that decision makers (i) believe future payoffs will occur and (ii) are not forced to take the immediate reward out of financial need. Low-income individuals may be both less likely to believe future payoffs will occur and less able to forego immediate rewards due to higher financial need; they may thus appear to discount the future more heavily. We propose that trust in one's community-which, unlike generalized trust, we find does not covary with levels of income-can partially offset the effects of low income on myopic decisions. Specifically, we hypothesize that low-income individuals with higher community trust make less myopic intertemporal decisions because they believe their community will buffer, or cushion, against their financial need. In archival data and laboratory studies, we find that higher levels of community trust among low-income individuals lead to less myopic decisions. We also test our predictions with a 2-y community trust intervention in rural Bangladesh involving 121 union councils (the smallest rural administrative and local government unit) and find that residents in treated union councils show higher levels of community trust and make less myopic intertemporal choices than residents in control union councils. We discuss the implications of these results for the design of domestic and global policy interventions to help the poor make decisions that could alleviate poverty.",
keywords = "Community, Decision making, Poverty alleviation, Temporal discounting, Trust",
author = "Jachimowicz, {Jon M.} and Salah Chafik and Sabeth Munrat and Prabhu, {Jaideep C.} and Weber, {Elke U.}",
Jachimowicz, JM, Chafik, S, Munrat, S, Prabhu, JC & Weber, EU 2017, 'Community trust reduces myopic decisions of low-income individuals', Proceedings of the National Academy of Sciences of the United States of America, vol. 114, no. 21, pp. 5401-5406. https://doi.org/10.1073/pnas.1617395114
Community trust reduces myopic decisions of low-income individuals. / Jachimowicz, Jon M.; Chafik, Salah; Munrat, Sabeth; Prabhu, Jaideep C.; Weber, Elke U.
In: Proceedings of the National Academy of Sciences of the United States of America, Vol. 114, No. 21, 23.05.2017, p. 5401-5406.
T1 - Community trust reduces myopic decisions of low-income individuals
AU - Jachimowicz, Jon M.
AU - Chafik, Salah
AU - Munrat, Sabeth
AU - Prabhu, Jaideep C.
AU - Weber, Elke U.
N2 - Why do the poor make shortsighted choices in decisions that involve delayed payoffs? Foregoing immediate rewards for larger, later rewards requires that decision makers (i) believe future payoffs will occur and (ii) are not forced to take the immediate reward out of financial need. Low-income individuals may be both less likely to believe future payoffs will occur and less able to forego immediate rewards due to higher financial need; they may thus appear to discount the future more heavily. We propose that trust in one's community-which, unlike generalized trust, we find does not covary with levels of income-can partially offset the effects of low income on myopic decisions. Specifically, we hypothesize that low-income individuals with higher community trust make less myopic intertemporal decisions because they believe their community will buffer, or cushion, against their financial need. In archival data and laboratory studies, we find that higher levels of community trust among low-income individuals lead to less myopic decisions. We also test our predictions with a 2-y community trust intervention in rural Bangladesh involving 121 union councils (the smallest rural administrative and local government unit) and find that residents in treated union councils show higher levels of community trust and make less myopic intertemporal choices than residents in control union councils. We discuss the implications of these results for the design of domestic and global policy interventions to help the poor make decisions that could alleviate poverty.
AB - Why do the poor make shortsighted choices in decisions that involve delayed payoffs? Foregoing immediate rewards for larger, later rewards requires that decision makers (i) believe future payoffs will occur and (ii) are not forced to take the immediate reward out of financial need. Low-income individuals may be both less likely to believe future payoffs will occur and less able to forego immediate rewards due to higher financial need; they may thus appear to discount the future more heavily. We propose that trust in one's community-which, unlike generalized trust, we find does not covary with levels of income-can partially offset the effects of low income on myopic decisions. Specifically, we hypothesize that low-income individuals with higher community trust make less myopic intertemporal decisions because they believe their community will buffer, or cushion, against their financial need. In archival data and laboratory studies, we find that higher levels of community trust among low-income individuals lead to less myopic decisions. We also test our predictions with a 2-y community trust intervention in rural Bangladesh involving 121 union councils (the smallest rural administrative and local government unit) and find that residents in treated union councils show higher levels of community trust and make less myopic intertemporal choices than residents in control union councils. We discuss the implications of these results for the design of domestic and global policy interventions to help the poor make decisions that could alleviate poverty.
KW - Community
KW - Decision making
KW - Poverty alleviation
KW - Temporal discounting
KW - Trust
Jachimowicz JM, Chafik S, Munrat S, Prabhu JC, Weber EU. Community trust reduces myopic decisions of low-income individuals. Proceedings of the National Academy of Sciences of the United States of America. 2017 May 23;114(21):5401-5406. https://doi.org/10.1073/pnas.1617395114