Strictly defined, "Street Smart" describes a person with knowledge gained by experience rather than education.
In practical application, "Street Smart" is what stupid people claim to be in order to save face when their stupidity comes to light. It is effective in that regard, as it can not be disproved and places the individual in a higher regard than someone who is "Book Smart" by promoting their nebulous "Smarts" as being more practical than the well-educated individual's.
In the context of psychology, the claim of being "Street Smart" when an individual's stupidity is made apparent is vital to preserving their mental well-being. Most people have been engineered to have
the fragile type of
high self-esteem, which is self-esteem developed in the absence of actual merit that would warrant high self-esteem. As a part of this fragile self-esteem, the person will believe that they are smart regardless of real intelligence, and when that person's iteration of reality is threatened (i.e. their stupidity is made apparent) the psyche protects itself by assuring the individual that what they've been told all their life (that they are smart) is still true by denying this new and conflicting information (their obvious stupidity) and substituting it with an
alternative reality, thus avoiding much Cognitive Dissonance (mental pain that results from beliefs not matching reality) and so averting a psychic break. To summarize in a quote, "
I reject your reality and replace it with my own."
Lance: "
The world is flat." Or whatever.
David: "No, the world is round. That's how we have a horizon. In any case, we've been to space and seen it for ourselves. Many, many times. Dumbass."
Lance: "WHATEVER I'M NOT
BOOK SMART I'M
STREET SMART"