Poor People and Rationality

I read many articles regarding poverty. Quite a few of them focus on the seemingly irrationality of poor people. This is a topic I have read about and thought about extensively.

Why do people who are poor spend money on fast food? Why do they buy designers clothes or purses? These are the topics I have read about.

Now, I haven’t read many articles critiquing how wealthy people spend their money. If anything, I have read advice from people who are wealthy about how to manage money. So, the ground is already uneven here. Why do we choose to focus on poor people, and how they manage their money, while taking advice from wealthy people? No one asks why rich people buy designer clothes.

Much of what has been written on the topic assumes that poor people are not smart, do not know how to manage money, and lack agency. None of these, in my experience, is true.

What is true is that you have to learn different things if you have a large sum of money. That is, managing less money, on a strict budget, dealing with expensive housing, and so forth, is different than having disposable income, being able to afford housing, and, even, put your kids through college.

But we shouldn’t assume the world revolves around rich people, taking their advice, and assuming that poor people are irrational.

Oftentimes, poor people have less to live on. They have a strict budget. They live paycheck to paycheck. They don’t have much, if anything, for savings. While I’m sure we could all improve in the area of money management, the fact that poor people live this way does not show that they are bad with money. It shows they have very little coming in for what they have to pay for.

If you are disadvantaged, and you are playing by the rules—that is, not engaging in illegal activities—you are probably more rational than privileged people. That is the conclusion I have come to, at least. The reasoning goes as follows: If you are trying to get ahead by playing by the rules, you have very little wiggle room for mistakes. One mistake can lead you back to poverty. One mistake can ruin your bank account. One mistake is all it takes, so you develop a habit of carefully making your choices. You choose carefully—more carefully than privileged people, who do not suffer the same consequences from one mistake.

This habitual training makes me think that poor people who are trying to keep afloat, and even rise up, are probably more rational than wealthy people. Why not take advice from them?

So let’s answer: Why do poor people buy designer clothes and purses? The answer is a lot of times they didn’t buy them. Oftentimes, these are gifts. The only time I shop a Kohl’s is when I have been given a gift card as a gift. In other cases, I shop at Ross, where I can buy designer clothes or bags for much cheaper than at department stores. And when I go to Ross, it’s not like the place is empty. There is a market for cheaper, but somewhat nice, clothes, shoes, and purses. This is why Ross is in business. Poor people need to go to the office, too, even if it’s just a secretary position. And, often, they have to look presentable for work. So they shop at Ross or get fancy things for gifts. Why do they want them? The same reason anyone else would: They are status symbols. Frequently, they are made better than cheaper things. But let me make one thing clear: I do not see many poor people walking around wearing Prada or carrying a Coach purse. I see poor people dressed in humble clothes.

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