Do the poor make rational decisions?

By Dr. Karin Troncoso.

This blog discusses decision making processes undertaken by people living in poverty in relation to cooking practices, and makes 8 recommendations for those undertaking development work on cooking with modern energy. Karin has recently moved from being a researcher with the MECS programme to the World Health Organisation. She will build on existing toolkits to further create and promote tools that fill the data gaps in the transition to clean cooking. This will include the Household Energy Assessment Rapid Tool (HEART).

When talking about access to clean energy for cooking, we usually associate it with poverty, as cooking with polluting fuels like biomass and kerosene is closely related with income. The community of people working in this field (development organizations, NGOs, universities, etc.) often think that we understand what the implications of poverty are and that what is needed is a behavioural change, to convince them to change. And then, when they do something contrary to what we were expecting, it is very tempting to question their rationality.

However, in my own research work and when talking with women living in poverty, I am always surprised how much thought people put into their decisions. Some of the things most of us consider most basic and do not even think about, like what to drink if you are thirsty, are very carefully weighted in contexts where, for example, access to clean water is not taken for granted.

Understanding how poverty determines a family’s ability to make decisions and to improve their lives is vital to ensure projects are designed to reduce (and not exacerbate) inequalities. Poor people are amongst the most vulnerable in society. Their strategy for mitigating risks involves balancing the different capitals they have, and while that include economic and physical capital it also includes social and cultural capital. From an economic point of view, their low income means they are less able to save and accumulate assets. That in turn restricts their ability to deal with a crisis when it strikes. For families living on the edge of the poverty line, vulnerability is a graver concern because any drop in income can push them into destitution. They may rely on their social capital making not upsetting others an important part of their rational thinking. As a result, the poor are usually risk averse and reluctant to engage in the high-risk, high-return activities that could lift them out of poverty. Risk is an important and necessary step in taking advantage of economic opportunities. Extreme poverty deprives people of almost all means of managing risk by themselves.

It is easy to forget that surrounding circumstances are very different for the poor than for the other members of society. The higher your income, the less you must take care of the basic constituents of your life (access to modern energy for cooking, clean water, immunizations, food, housing) because everything is taken care of for you. For example, in rich countries it would be extremely difficult to cook with biomass inside your home. Cooking with clean fuels is the default situation. This is not the case in low-income countries. For many, cooking with LPG requires investment that goes beyond monetary value – travelling hours to buy the appliance and the cylinder, making the necessary arrangements for installation, time and travel costs for refilling the cylinder (as refilling centres are sometimes very far away). People in low income have poor infrastructure that limits their choices, and making choices in these setting is not without cost. It demands time, mental energy (to gather and process information), and emotional energy (to exercise the self-control that is necessary to take the healthiest choice). Because the poor need to make these choices all the time, they may wait to make a choice if they don’t consider it vital. The solution is not always to give more options, but instead to reduce the need to make difficult choices.

For example, during research conducted in August 2021 in Chinautla, Guatemala I interviewed two women selling tortillas on the street. The women produce 400 tortillas every day to sell at 0.25 Quetzal (or 3.3 US¢) per tortilla. Both women spend 50Q on corn/flour and other ingredients (materials for producing). One woman uses LPG and the other uses firewood to prepare the tortillas. The woman that uses the LPG spends two hours and 25Q on fuel per day to produce 400 tortillas. The woman that uses firewood also spends two hours to prepare the tortillas but also another 90 minutes collecting the wood. She then spends 7Q per day to rent a wood canopy with a traditional firewood stove near the plaza since wood burning is not allowed in the central plaza. All in all, one woman spends two hours per day and has net earnings of 25Q, while the other woman spends 3.5 hours and has net earnings of 43Q. What is the right decision? What would your decision be?

Decision making is a process influenced by one’s level of vulnerability (assets, human resources, external circumstances), the knowledge you have, how prepared you are for any possible adversity and what would happen in case of failure. People living in poverty have little or no assets, limited human resources, limited access to information (we tend to forget that to be informed requires investing time that you may not have), and, as such, they heavily rely on external information, support or incentives provided by the community, their networks, and the government. In the Guatemalan example above, the woman cooking with LPG is married, and her husband helps her to install the LPG stove, canister, and table every day, while the local government gave her the stove. Whilst the second woman was offered an LPG stove, she does not have anywhere to keep it, nor the means to move it to and from the city centre each day. And, as she is a single mother, she cannot afford the cost of LPG. The extra 18 Q that she can make each day by collecting the wood makes a difference for her. This scenario not only considers the implications of decision-making on livelihoods, but also begs the question: What could local government do more to really help single mothers access clean cooking?

Market solutions work for those able to take some risk (the product you are buying could not work properly, could be damaged in a year, could be difficult to use, or you may not get used to it). If we only reach those who are ready and financially able to adopt transitions, we risk leaving the more vulnerable behind. Those who are currently at risk of being left behind, who may be marginalized, ignored, unseen or unable to speak for themselves, need to be heard through different strategies.

The solutions by default, i.e., those defined by the existing regulations (for example when it is forbidden to burn firewood in a city), infrastructure (tap water), economic incentives (taxes to polluting fuels like kerosene), information, subsidies, or trust, naturally direct our choices. For example, the recommendations of the government, our doctor, our employer, or our child’s teacher can have a powerful influence on our decisions if we trust them (even if we do not fully understand the reason for the recommendations).

Considering this, here are my thoughts for those undertaking development work on cooking with modern energy:

1. Before beginning a study or project, make a conscious effort to understand the community. We need to engage in formal and informal conversations and learn to listen closely, looking for ways to capture a deeper understanding of the prevailing values, attitudes, and preferences of the people we speak and work with.
2. We need to ask questions even if they seem to have obvious answers and never assume we know the answers to a given question, things are never as clear cut as we might think.
3. We need to make a conscious effort to be more inclusive of whom we talk to and engage with through our project and make plans and take actions (where necessary) to ensure interventions would not exacerbate inequalities or cause a problem to some members of the community we have engaged through the project.
4. When considering the implication of poverty, we need to think: What is the risk I am asking them to take? How much time would they need to invest in learning to use the new technology? Who else can take the risks identified by the users? How can we help creating an enabling environment? What measures am I taking to ensure that I am being inclusive, and I am considering people’s economic constrains? Who has the incentive to act? So, who should be paying?
5. It is important to understand that households mitigate risk through diversification (e.g., stacking of stoves and fuels). Therefore, its very unlikely that low-income households would ever switch to the exclusive use of a new technology overnight. Instead, the adoption and sustained use of a new technology is a fragile process that requires nurturing over a substantial period of time. Only by supporting people throughout this journey away from biomass and towards a clean fuel stack can we hope to achieve truly sustainable social impact.
6. Since poverty makes planning for the future very difficult, it is important to focus on what would be the direct and immediate benefits of our intervention.
7. Information is important, but it is more important to reduce perceived and real risks (for example making sure the technology is of good quality and the user can return it if not completely satisfied).
8. Finally, before trying to engage in behavioural change, we need to make sure we understand why people make the choices they make, what is the rational around it, is there missing information that could help them make better choices? Do they have reason to trust us? What are the implications of the change we are proposing? How can I lower the risks?