Scarcity: Why Having Tool Little Means So Much

Sendhil Mullainathan & Eldar Shafir, “Scarcity: Why Having Tool Little Means So Much,” Times Books, 2013, 234 pp.

This book expands on behavioral economics demonstrating how scarcity, whether it be money, time, loneliness, or food, focuses the mind to such an extent that poor decisions result.  We all have limited information-processing abilities, what the authors call bandwidth.  Just as the busy are concerned with every minute of the day, and the poor focus on money, everybody under scarcity is profoundly influenced by how their bandwidth is distributed and spent.  Whenever scarcity in any area is experienced, our rational decision making capabilities are significantly and measurably compromised. 

Scarcity is a phenomenon well-documented by psychologists: if the mind is focused on one thing, other abilities and skills—attention, self-control, and long-term planning—often suffer. Like a computer running multiple programs, our mental processors begin to slow down. We don’t lose any inherent capacities, just the ability to access the full complement ordinarily available for use.

My Notes:

Pg. 7:  Scarcity captures the mind.  Just as those starving have food on their mind, when we experience scarcity of any kind, we become absorbed by it.  The mind orients automatically, powerfully, toward unfulfilled needs.  For the hungry, that need is food.  For the busy it might be a project that needs to be finished.  For the cash-strapped it might be this month’s rent payment; for the lonely, a lack of companionship.  Scarcity is more than just the displeasure of having very little.  It changes how we think.  It imposes itself on our minds.

...the poor do have lower effective capacity than those who are well off.  This is not because they are less capable, but rather because part of their mind is captured by scarcity.  (p. 60).

Pg. 13:  We can directly measure mental capacity or, as we call it, bandwidth.  We can measure fluid intelligence, a key resource that affects how we process information and make decisions.  We can measure executive control, a key resource that affects how impulsively we behave.  And we find that scarcity reduces all these components of bandwidth—it makes us less insightful, less forward-thinking, less controlled.  And the effects are large.  Being poor, for example, reduces a person’s cognitive capacity more than going one full night without sleep.  It is not that the poor have less bandwidth as individuals.  Rather, it is that the experience of poverty reduces anyone’s bandwidth.

Pg. 107:  In 2006, there were more than 23,000 payday lender branches in the United States, which was more than all the McDonalds’s (12,000) and Starbucks (almost 9,000) locations combined.  Three-quarters of all payday loan volume comes from rollovers, ultimately accounting for $3.5 billion in fees each year.  However, the cash-strapped borrow in many ways, not just through payday loans.  They ‘borrow’ by paying their bills late.  About one of every six families in the lowest income quintile (the bottom 20 percent) pays at least one bill late in any given year.  One study found that 18 percent of the poorest families have had their phone disconnected and 10 percent have had a utility shut off within a twelve-month period. 

Pg. 120:  A common theme stretches across many forms of the tunneling tax.  Scarcity brings about behaviors that make us shortsighted.  We ignore the (future) health cost of eating out when we are busy.  We do not think about the implications of paying back payday loans (in the future) when we are tight on cash.  The scarcity that captures us is now, and it yields a tunneling tax and makes us act myopic.

Pg. 147:  Poverty is surely the most widespread and important example of scarcity.  The breadth and depth of poverty in the modern world is striking.  UNICEF estimates that 22,000 children die each day due to poverty.  Nearly one billion people are so illiterate that they cannot even sign their names.  Half the children in the world live below the global poverty line.  Roughly 1.6 billion people live without electricity.

Addenda:  The authors of this book came across an old study that became the genesis of this current book.  Toward the end of World War II, while thousands of Europeans were dying of hunger, 36 men at the University of Minnesota volunteered for a study that would send them to the brink of starvation. Allied troops advancing into German-occupied territories with supplies and food were encountering droves of skeletal people they had no idea how to safely renourish, and researchers at the university had designed a study they hoped might reveal the best methods of doing so. But first, their volunteers had to agree to starve.

The physical toll on these men was alarming: their metabolism slowed by 40 percent; sitting on atrophied muscles became painful; though their limbs were skeletal, their fluid-filled bellies looked curiously stout. But researchers also observed disturbing mental effects they hadn’t expected: obsessions about cookbooks and recipes developed; men with no previous interest in food thought—and talked—about nothing else. Overwhelming, uncontrollable thoughts had taken over, and as one participant later recalled, “Food became the one central and only thing really in one’s life.” There was no room left for anything else.