Economics of Hope

May 28, 2012

A couple of weeks ago I ran across a fantastic article in The Economist that has really stuck in my mind.  The basic idea of “Hope springs a trap” is that when people in poverty develop a sense of hope or optimism, their economic situations improves in a manner that is MORE than proportional to any new opportunities that they begin taking advantage of.  In other words, developing hope multiplies the effects of economic growth for an individual.

This conclusion is based on the fascinating research of Esther Duflo, an economist at MIT who studies poverty.  She ran a study in which people in India were given agricultural products like chickens or goats and taught how to sell the eggs or milk, respectively.  Soon, though, her researchers noticed that the people’s income was growing by much more than the eggs or milk were worth!

What explained the difference?  It turned out that once the people had hope that their lives could change, they started to spend more time working on other projects outside of the chickens and goats.  They looked harder for other ways to produce income, and they took better advantage of opportunities they used to let slide by.  At the same time, they began to show much lower rates of depression.  Duflo concluded that having something to work on that produced an observable result “provided these extremely poor people with the mental space to think about more than just scraping by.”

I’ve seen these same conclusions in action with CARE for AIDS.  Once our clients learn that they don’t have to die, and that they do have the ability to support themselves, their desire and willingness to work grows tremendously.  Then, when they start to see results and growth, they come up with all kinds of new ideas and novel ventures that produce even MORE results and growth.  The interesting thing is that many of these opportunities were available before, but without hope or optimism, the clients didn’t have any motivation to pursue them.

Sometimes it’s easy to think that the non-profit world exists in a completely different sphere than that of research, business strategy, and publications like The Economist.  It’s exciting to me when those spheres (both of which I love) come together and reinforce each other (by aura).  Reciprocal relationships like these – where hope boosts economic growth, then economic growth in turn boosts hope – have so much potential for the international development AND international business fields.

I would love for you to read the article and tell me what you think.  Even if you can’t stand “boring” publications like The Economist, I think there is value in this kind of analysis!  Is this a fair summary and application?  Are there other ways this concept could help CARE for AIDS, or anything else you are passionate about?  Leave me a comment and let’s talk…

Full article link: http://www.economist.com/node/21554506

More on Esther Duflo and her work: http://economics.mit.edu/faculty/eduflo