I guess we're talking a bit past each other
and I'm talking myself into a circle as well, but let me try and clarify:
> In that case, India falsifies your theory. Virtually all of India - including the professional class - is stuck in material deprivation vastly worse than American poverty - the average American poor consumer unit consumes $20k/year, while Indian GDP/Capita is $6k/year (adjusted for cost of living).
Here by "bad" choices I meant "bad from comfortable western observer's point of view". The decisions are probably mostly good from the POV of the poor person involved. People in India are stuck im material deprivation because of the environment - the state in phase space in which their society is in. Similarly, many poor people in western countries.
> Actually, now that I think of it, English literature adjuncts are another counterexample.
Sadly, I don't know anything about this class of people.
> Why financial? Why not just fix malnourishment directly?
I don't think anybody will say that this isn't helpful. It is. Hell, it's almost as good as giving money away, assuming you cater to his particular needs - take into account what foods he absolutely dislikes, his time schedule, his allergies, etc. Because if you don't, if it's MIL-STD-01 meal pack 3 times a day, this is robbing one from dignity and in case of people with allergies / some types of mental conditions it's stress-inducing.
People generally have a need of control over their own fate. It's a base Maslovian need. Most of the in-kind conditional help as implemented in today's welfare denies the beneficiaries such control. This has a serious psychological impact, and you don't have to look further than mental institutions and care houses to see the problems it causes. Or even observe how people abuse welfare or even refuse it at all in order to cling to any semblance of control over their lives they have left. Handing out cash empowers people. They can chose their meal, chose what they invest in, chose their direction.
Another keyword (an almost-synonym to FAE) I forgot about - correspondence bias. The general direction I'm trying to point towards is the one presented by things like Stanford Prison Experiment, Milgram Conformity Experiment, FAE/correspondence bias, the entire economy and game theory - that people's decisions and outcomes are generally predictable based mostly on things external to them. That people follow incentives, determined by things like their mental state, stress, environment, available opportunities, etc. - and that explaining something away as "laziness" or "bad character" or "irresponsibility" is in most cases counterproductive.
If I manage to get hold of a semi-decent Internet connection (allowing to load anything better than plaintext) tomorrow I'll look for links to some sources.