ABSTRACT
This chapter presents a theoretical framework—based largely on behavioral and institutional economics. It discusses how Individual Development Accounts (IDAs) might be one way to help to break the vicious cycle. The chapter focuses on a theory of the "non-economic" (or social and psychological) effects of asset ownership. It describes how assets might affect not only pocketbooks but also hope, thought patterns, and social relationships. The theory in the chapter explains—without recourse to concepts of weakness or moral sloth—how the poor might come to believe that the world and their chances in it are worse than they really are. The theory suggests how assets might help to align views more closely with the real world. The chapter argues that asset ownership improves the information available when making choices, reduces the psychological cost of making effort, and helps people to "make their own luck" by improving their social relationships.
