In the United Kingdom and elsewhere in high-income countries, behavioral economics informed policies are all the rage. The argument justifying behavioral approaches is well-known: traditional economics assumes that humans are rational and will make decisions that maximize their well-being, whereas in fact, many people still make decisions with harmful, self-defeating consequences.
Last week I attended the Microfinance Impact & Innovations Conference organized by the Financial Access Initiative (FAI) in New York.
A month ago I blogged some reflections on transparency. Transparency is the motherhood and apple pie of microfinance, I wrote, if not in those words.
A central question in judging microcredit: When can we as creditors trust the judgment of the poor as borrowers? These days we can all reel off examples of unwise borrowing in rich countries (though I daresay unwise lending is more to blame for the current crisis). Do the world's poorest people, with less margin for financial folly, borrow more prudently? Two things I've read recently tend toward opposite answers to this question.
Next week, President Obama will meet with Congress to begin discussing changes in the way that the United States regulates who can enter this country and what they can do here. The elephant in the room: global development. U.S. immigration policy transforms the lives of low-income people from all over the world, but you won’t hear much about them.
Sendhil Mullainathan, the second MacArthur Fellow here blogged, writes in Seed Magazine about how human psychological foibles influence how we borrow and save: