Scarcity: Why Having Too Little Means So Much - Hardcover

9780805092646: Scarcity: Why Having Too Little Means So Much
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A surprising and intriguing examination of how scarcity―and our flawed responses to it―shapes our lives, our society, and our culture

Why do successful people get things done at the last minute? Why does poverty persist? Why do organizations get stuck firefighting? Why do the lonely find it hard to make friends? These questions seem unconnected, yet Sendhil Mullainathan and Eldar Shafir show that they are all examples of a mind-set produced by scarcity.

Drawing on cutting-edge research from behavioral science and economics, Mullainathan and Shafir show that scarcity creates a similar psychology for everyone struggling to manage with less than they need. Busy people fail to manage their time efficiently for the same reasons the poor and those maxed out on credit cards fail to manage their money. The dynamics of scarcity reveal why dieters find it hard to resist temptation, why students and busy executives mismanage their time, and why sugarcane farmers are smarter after harvest than before. Once we start thinking in terms of scarcity and the strategies it imposes, the problems of modern life come into sharper focus.

Mullainathan and Shafir discuss how scarcity affects our daily lives, recounting anecdotes of their own foibles and making surprising connections that bring this research alive. Their book provides a new way of understanding why the poor stay poor and the busy stay busy, and it reveals not only how scarcity leads us astray but also how individuals and organizations can better manage scarcity for greater satisfaction and success.

"synopsis" may belong to another edition of this title.

About the Author:

Sendhil Mullainathan, a professor of economics at Harvard University, is a recipient of a MacArthur Foundation "genius grant" and conducts research on development economics, behavioral economics, and corporate finance. He lives in Cambridge, Massachusetts.

Eldar Shafir is the William Stewart Tod Professor of Psychology and Public Affairs at Princeton University. He conducts research in cognitive science, judgment and decision-making, and behavioral economics. He lives in Princeton, New Jersey.

Excerpt. © Reprinted by permission. All rights reserved.:

INTRODUCTION

If ants are such busy workers, how come they find time to go to all the picnics?
—Marie Dressler,
Academy Award–winning actress

We wrote this book because we were too busy not to.

Sendhil was grumbling to Eldar. He had more to-dos than time to do them in. Deadlines had matured from "overdue" to "alarmingly late." Meetings had been sheepishly rescheduled. His in-box was swelling with messages that needed his attention. He could picture his mother's hurt face at not getting even an occasional call. His car registration had expired. And things were getting worse. That conference one connecting flight away seemed like a good idea six months ago. Not so much now. Falling behind had turned into a vicious cycle. Re-registering the car was now one more thing to do. A project had taken a wrong direction because of a tardy e-mail response; getting it back on track meant yet more work. The past-due pile of life was growing dangerously close to toppling.

The irony of spending time lamenting the lack of time was not lost on Eldar. It was only partly lost on Sendhil who, undeterred, described his plan for getting out.

He would first stem the tide. Old obligations would need to be fulfilled, but new ones could be avoided. He would say no to every new request. He would prevent further delays on old projects by working meticulously to finish them. Eventually, this austerity would pay off. The to-do pile would shrink to a manageable level. Only then would he even think about new projects. And of course he would be more prudent going forward. "Yes" would be rare and uttered only after careful scrutiny. It would not be easy, but it was necessary.

Having made the plan felt good. Of course it did. As Voltaire noted long ago, "Illusion is the first of all pleasures."

A week later, another call from Sendhil: Two colleagues were putting together a book on the lives of low-income Americans. "This is a great opportunity. We should write a chapter," he said. His voice, Eldar recalls, lacked even a trace of irony.

Predictably, the chapter was "too good to pass up," and we agreed to do it. Just as predictably, it was a mistake, written in a rush and behind schedule. Unpredictably, it was a worthwhile mistake, creating an unexpected connection that eventually led to this book.

Here is an excerpt from our background notes for that chapter:

Shawn, an office manager in Cleveland, was struggling to make ends meet. He was late on a bunch of bills. His credit cards were maxed out. His paycheck ran out quickly. As he said, "There is always more month than money." The other day, he accidentally bounced a check after overestimating the money in his account; he had forgotten a $22 purchase. Every phone call made him tense: another creditor calling to "remind" him? Being out of money was also affecting his personal life. Sometimes at dinner he would put in less than his fair share because he was short. His friends understood, but it didn't feel good.

And there was no end in sight. He had bought a Blu-ray player on credit, with no payments for the first six months. That was five months ago. How would he pay this extra bill next month? Already, more and more money went to paying off old debts. The bounced check had a hefty overdraft charge. The late bills meant late fees. His finances were a mess. He was in the deep end of the debt pool and barely staying afloat.

Shawn, like many people in his situation, got financial advice from many sources, all of it pretty similar:

Don't sink any deeper. Stop borrowing. Cut your spending to the minimum. Some expenses may be tough to cut, but you'll have to learn how. Pay off your old debts as quickly as possible. Eventually, with no new debts, your payments will become manageable. After this, remain vigilant so as not to fall back in. Spend and borrow wisely. Avoid unaffordable luxuries. If you must borrow, be clear about what it takes to pay it back.

This advice worked better in theory than in practice for Shawn. Resisting temptation is hard. Resisting all temptations was even harder. A leather jacket he had coveted went on sale at a great price. Skimping on his daughter's birthday gift felt less sensible as the day got closer. There were too many ways to spend more than he planned. Shawn eventually sank back into the debt pool.

It did not take long for us to notice the resemblance between Sendhil's and Shawn's behavior. Missed deadlines are a lot like overdue bills. Double-booked meetings (committing time you do not have) are a lot like bounced checks (spending money you do not have). The busier you are, the greater the need to say no. The more indebted you are, the greater the need to not buy. Plans to escape sound reasonable but prove hard to implement. They require constant vigilance—about what to buy or what to agree to do. When vigilance flags—the slightest temptation in time or in money—you sink deeper. Shawn ended up stuck with accumulating debt. Sendhil ended up stuck under mounting commitments.

This resemblance is striking because the circumstances are so different. We normally think of time management and money management as distinct problems. The consequences of failing are different: bad time management leads to embarrassment or poor job performance; bad money management leads to fees or eviction. The cultural contexts are different: falling behind and missing a deadline means one thing to a busy professional; falling behind and missing a debt payment means something else to an urban low-wage worker. The surroundings differ. The education levels differ. Even aspirations can differ. Yet despite these differences, the end behavior is remarkably similar.

Sendhil and Shawn did have one thing in common: each of them was feeling the effects of scarcity. By scarcity, we mean having less than you feel you need. Sendhil felt harried; he felt he had too little time to do all the things he needed to do. Shawn felt cash strapped, with too little money for all the bills he needed to pay. Could this common connection explain their behavior? Could it be that scarcity itself led Sendhil and Shawn to behave in such similar ways?

Uncovering a common logic to scarcity would have big implications. Scarcity is a broad concept that extends well beyond these personal anecdotes. The problem of unemployment, for example, is also the problem of financial scarcity. The loss of a job makes a household's budget suddenly tight—too little income to cover the mortgage, car payments, and day-to-day expenses. The problem of increasing social isolation—"bowling alone"—is a form of social scarcity, of people having too few social bonds. The problem of obesity is also, perhaps counterintuitively, a problem of scarcity. Sticking to a diet requires coping with the challenge of having less to eat than you feel accustomed to—a tight calorie budget or calorie scarcity. The problem of global poverty—the tragedy of multitudes of people around the world making do with a dollar or two a day—is another kind of financial scarcity. Unlike the sudden and possibly fleeting tightening of one's budget due to job loss, poverty means a perpetually tight budget.

Scarcity connects more than just Sendhil's and Shawn's problems: it forms a common chord across so many of society's problems. These problems occur in different cultures, economic conditions, and political systems, but they all feature scarcity. Could there be a common logic to scarcity, one that operates across these diverse backdrops?

We had to answer this question. We were too busy not to.

SCARCITY CAPTURES THE MIND

Our interest in scarcity led us to a remarkable study from more than a half century ago. The authors of that study did not think of themselves as studying scarcity, but to our eyes they were studying an extreme form of it—starvation. It was toward the end of World War II, and the Allies realized they had a problem. As they advanced into German-occupied territories, they would encounter great numbers of people on the edge of starvation. The problem was not food; the Americans and British had enough to feed the prisoners and the civilians they were liberating. Their problem was more technical. How do you begin feeding people who have been on the edge of starvation for so long? Should they be given full meals? Should they be allowed to eat as much as they want? Or should you start by underfeeding them and slowly increase their intake? What was the safest way to bring people back from the edge of starvation?

The experts at the time had few answers. So a team at the University of Minnesota conducted an experiment to find out. Understanding how to feed people, though, requires first starving them. The experiment started with healthy male volunteers in a controlled environment where their calories were reduced until they were subsisting on just enough food so as not to permanently harm themselves. After a few months of this, the real experiment began: finding out how their bodies responded to different feeding regimens. Not an easy experiment to be a subject in, but this was "the Good War," and conscientious objectors who did not go to the front were willing to do their part.

The thirty-six subjects in the study were housed in a dormitory and were carefully monitored, with every behavior observed and noted. Though the researchers cared most about the feeding part of the study, they also measured the impact of starvation. Much of what happens to starving bodies is quite graphic. Subjects lost so much fat on their butts that sitting became painful; the men had to use pillows. Actual weight loss was complicated by edema—the men accumulated as much as fourteen pounds of extra fluid due to starvation. Their metabolism slowed down by 40 percent. They lost strength and endurance. As one subject put it, "I notice the weakness in my arms when I wash my hair in the shower; they become completely fatigued in the course of this simple operation."

Not only did their bodies weaken; their minds changed as well. Sharman Apt Russell describes a lunch scene in her book Hunger:

The men became impatient waiting in line if the service was slow. They were possessive about their food. Some hunched over their trays using their arms to protect their meal. Mostly they were silent, with the concentration that eating deserved. . . . Dislikes for certain foods, such as rutabagas, disappeared. All food was eaten to the last bite. Then they licked their plates.

This is largely what you might expect of people who are starving. But some mental changes they showed were more unexpected:

Obsessions developed around cookbooks and menus from local restaurants. Some men could spend hours comparing the prices of fruits and vegetables from one newspaper to the next. Some planned now to go into agriculture. They dreamed of new careers as restaurant owners. . . . They lost their will for academic problems and became far more interested in cookbooks. . . . When they went to the movies, only the scenes with food held their interest.

They were focused on food. Of course if you are starving, getting more food should be a priority. But their minds focused in a way that transcended practical benefits. The delusions of starting a restaurant, comparing food prices, and researching cookbooks will not alleviate hunger. If anything, all this thinking about food—almost a fixation—surely heightened the pain of hunger. They did not choose this. Here is how one participant in the Minnesota study recalled the frustration of constantly thinking about food:

I don't know many other things in my life that I looked forward to being over with any more than this experiment. And it wasn't so much . . . because of the physical discomfort, but because it made food the most important thing in one's life . . . food became the one central and only thing really in one's life. And life is pretty dull if that's the only thing. I mean, if you went to a movie, you weren't particularly interested in the love scenes, but you noticed every time they ate and what they ate.

The hungry men did not choose to ignore the plot in favor of the food. They did not choose to put food at the top of their mind. Instead, hunger captured their thinking and their attention. These behaviors were only a footnote in the Minnesota study, not at all what the researchers were interested in. To us, they illustrate how scarcity changes us.

Scarcity captures the mind. Just as the starving subjects had 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.

This is a lot to infer from just one study. Starvation is an extreme case: it involves scarcity but it also involves many other physiological changes. The study had only thirty-six subjects. The evidence we cite consists largely of the mutterings of hungry men, not hard numbers. But many other, more precise studies have shown the same results. Not only that, they give a window into exactly how scarcity captures the mind.

One recent study asked subjects to come to a lab around lunchtime, not having eaten for three to four hours. Half of these hungry subjects were sent out to grab lunch, the others weren't. So half were hungry and half were sated. Their task in the study was simple: Watch a screen. A word will flash. Identify the word you just saw. So, for example, TAKE might flash and the subjects would have to decide whether they just saw TAKE or RAKE. This seems a trivial task and it would have been except that everything happened quickly. Very quickly. The word itself flashes for 33 milliseconds—that is, 1/30 of a second.

Now you might think that the hungry subjects might do worse, being tired and unfocused from their hunger. But on this particular task, they did as well as the sated subjects. Except in one case. The hungry did much better on food-related words. They were much more likely to accurately detect the word CAKE. Tasks such as these are designed to tell us what is at the top of someone's mind. When a concept occupies our thoughts, we see words related to it more quickly. So when the hungry recognize CAKE more quickly, we see directly that food is at the top of their minds. Here we do not rely on odd behaviors such as leafing through cookbooks or making plans to be a restaurateur to infer their fixation. The speed and accuracy of their responses directly show us that scarcity has captured the hungry subjects' minds.

And it does so on a subconscious level. The tiny time scales in this task—outcomes measured in milliseconds—were devised to observe fast processes, fast enough to remain beyond conscious control. We now know enough about the brain to know what these time scales mean. Complex higher-order calculations require more than 300 milliseconds. Faster responses rely on more automatic subconscious processes. So when the hungry recognize CAKE more quickly, it is not because they choose to focus more on this word. It happens faster than they could choose to do anything. This is why we use the word capture when describing how scarcity focuses the mind.

This phenomenon i...

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  • PublisherTimes Books
  • Publication date2013
  • ISBN 10 0805092641
  • ISBN 13 9780805092646
  • BindingHardcover
  • Edition number4
  • Number of pages304
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