Why Poor Countries are Poor | Rational Choice Perspective |

“Lack of sufficient resources to meet the basic necessities of life” is called poverty. This is also called “Absolute Poverty” or “Extreme Poverty”. One of the basic sufficient resources includes enough food to survive, clean water, and shelter. This we can say is a qualitative definition of poverty.

The World Bank gives us a statistical definition of poverty. According to the World Bank, the person who earns less the $1.90 per day is a poor man. According to this definition, we can say that there are no poor people in the United States. To cope with this problem, we have a concept of Relative Poverty. Through Relative Poverty, we measure the rate of poverty according to the perspective of one country under discussion.

We can also measure poverty in terms of health, education, employment opportunities, sanitation, political empowerment, and the Human Development Index (HDI).

“Rationalism” is a theory that focuses on the behavior of Individuals. It means that the unit of analysis for Rationalists is “Individual”. One of the core assumptions of Rationalism includes:

1. All humans are essentially self-interested actors. Human actions and behavior are not dependent on culture, gender, race, or ethnicity.

2. Faced with the same set of circumstances, we can expect all humans to make basically the same decisions.

3. Rationality is a universal trait.

4. Self-interest is a context-dependent.

5. Individuals do strategic calculations before taking any decision.

6. There Is also uncertainty and the possibility of bad choices. This is due to the lack of proper and adequate information.

7. While making decisions, individuals also face many constraints. The important constrains which the individuals face are two:

i. Economic

ii. Institutional

One of the main argument of why poor countries are poor given by rational choice theory includes:

1. In poor countries, there is individual rationality and collective irrationality.

2. The rationality of having too many children.

3. The free-rider problem.

4. Non-effective state

5. Corruption