ABSTRACT
The poor are exposed to greater risks than those who are better off, but, perhaps as important, they are also in less of a position to take risks as well. Jane Pryer argues that as households move closer to extreme poverty and destitution, they become very risk averse. Muir Wood argues that such risk aversion among the poor produces dysfunctional time preference behavior. So it should not be surprising that, in poverty, time discounting of future income is over discounted relative to short-term self-interest, which creates a further basis for the poor to choose income now over avoiding climate change in the future. In Dean Spear's experimental setup, a choice between cooking oil and empty tiffin was taken as a choice between immediate temptation versus a long-term investment that offers no immediate gratification. Spears found a statistically significant difference in performance between those in the poor group, who had to choose, as compared to the rich, who did not.
