Conventional pro-poor policies typically tend to focus on relaxing external (material resource) constraints such as lack of credit, education or insecure property rights. Largely missing is a focus on internal (psychological) constraints that may cause poverty traps. One example of such an internal constraint is an aspirations failure, defined as the failure to aspire to our own potential.
Aspirations positively affect the outcomes that individuals achieve. Empirical evidence gathered across a wide range of countries and settings shows that low aspirations go hand-in-hand with persistent poverty. Moreover, this link between poverty and low aspirations cannot be fully explained by lack of opportunities or information about pathways out of poverty. Appadurai (2004) refers to what appears to be a lack of the ‘capacity to aspire’ among the poor – which raises the question of whether such aspirations failure is a cause of poverty, or its consequence.
In my paper, “Poverty and Aspirations Failure” (with P. Dalton and A. Mani, Economic Journal, , Vol. 126, Issue 590, February 2016, pp.165-188), we provide a conceptual framework linking poverty and aspirations, which shows that it is the latter. The paper outlines a theoretical framework where higher aspirations help achieve better outcomes – and better outcomes (achieved through higher effort) spur higher aspirations too. The research builds on the assumption that individuals underestimate this latter channel, i.e. how their aspirations may evolve over their lifetime as a consequence of their current effort. It is not that the poor alone suffer from this bias, the rich do too. However, those who are already poor and marginalised, given their low initial wealth and marginal social position, have a lower expected benefit from investing effort to achieve their goals and thus reach their aspirations. In the long-run, such an effect lowers the aspiration level of a poor person as well. Taken together, the implication is that persistent poverty makes it more likely that these internal constraints become self-fulfilling and, in the long run, an independent source of disadvantage for poor persons in their own right. Poverty lowers the aspirations’ level of a poor person, relative to what he could optimally aim to achieve”. This is what we refer to as an aspirations failure. In this sense, poverty curtails a poor person’s capacity to aspire, in the spirit of Appadurai (2004).
The key policy implication of the paper is that interventions that address aspiration levels can, at the very minimum, enhance the effectiveness of policies that address material constraints. Moreover, under some conditions, pro-poor policies aimed at raising aspirations can enhance welfare, without any change in material circumstances.
These theoretical implications are substantiated by an increasing body of empirical work. Beaman’s et al. (2012), for instance, found that in India, the exposure to female leaders in local government has raised both the aspirations and educational attainment of girls significantly, despite no change in the resources available for their education. Likewise, Bernard et al. (2014) found that poor rural Ethiopians increased their aspirations and assets six months after they watch a documentary about people from similar communities who had succeeded in their business.
All in all, the role of constraints internal to individuals in perpetuating poverty has been largely overlooked in the development debate. The World Development Report (2015) provides an extensive review of the evidence underpinning this new way of looking at pro-poor policies.