Optimize Over a Lifecycle When Next Week Is Uncertain

Anchored to: the three assumptions of human capital theory and why each fails under housing instability

Human capital theory makes a clean promise. Invest in knowledge and skills, get better decisions, and better outcomes follow (Becker, 1964; Lusardi & Mitchell, 2014).

I don’t dismiss it. It has produced real research and rightly pulled attention toward financial education. But it rests on three assumptions. Stable time horizons. Deliberation untouched by trauma or crisis. And contexts that enable choice rather than constrain it.

For someone facing housing instability, each one fails. You can’t optimize across a lifecycle when next week is uncertain. Deliberation isn’t weightless when the body is exhausted, hungry, or on constant alert. And context does more than nudge a choice. It sets the field of what looks possible at all (Roussel, 2026).

So when a program built on this theory reports disappointing results with people in crisis, the usual conclusion is that participants didn’t absorb enough. I’d propose another reading. The theory was answering a question about a different person.

That’s the shift behind how we teach. We don’t ask people to build a lifetime plan on day one. We ask what they need to be stable this month, and we let the planning horizon grow as the ground gets firmer.

Let me say what this critique is not. It isn’t a claim that learning doesn’t matter or that people in crisis can’t learn. They learn constantly, and quickly, because they have to. The claim is that the theory’s picture of the learner leaves out the conditions that decide whether learning turns into action. A model that can’t see those conditions will keep misreading the evidence it collects.

This week’s episode goes through the three assumptions one at a time.

Where have you seen a program judged a failure when the design assumption was the real problem?