The word “scarcity” in the context of economics typically calls up thoughts about how to most efficiently allocate scarce resources. Whether we’re talking about companies turning limited inputs into profitable ventures or governments choosing where best to spend tax revenue, economics is a social science dedicated to studying scarcity.
Behavioral economics professors Sendhil Mullainathan and Eldar Shafir explore this theme, but with a twist, in their book, Scarcity: Why Having Too Little Means So Much. Their focus is on what they call the “scarcity mindset,” and how operating under scarcity changes the way we think, reason, and make decisions.
The authors draw parallels throughout their book between the busy, who lack the resource of time, and the poor, who lack financial resources. In both cases, they argue, scarcity “captures the mind,” and “can help explain many of the behaviors and the consequences of scarcity.”
Think about it this way: you’re busy at work, with back-to-back meetings, several huge projects coming up, and you’re still trying to finish something that should have been completed a week ago. In this state, it’s difficult to think about anything beyond what immediately needs to be done. You may attend one of your children’s piano recitals, for instance, but your thoughts are squarely on the work waiting for you back at the office. You can’t even think ahead to the next project, so by the time you actually start on it, you’re even further behind. You’ve fallen into a scarcity trap.
The authors argue that scarcity creates a “tax” on your mental bandwidth, which can have real implications on your decision-making and impulse control. And, worse, there are actual negative cognitive effects from the scarcity mindset, especially for the poor.
Quoting from the book, “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.”
Whether you’re operating in a scarcity mindset caused by a lack of money or a lack of time, one thing is clear: scarcity begets further scarcity. The poor borrow money to tide them over and end up further in debt, and the busy push deadlines and end up further behind.
The authors do offer sensible solutions for this problem, which in one way or another affects us all at some point. But you’ll have to carve time out of your busy schedule to read it and learn more.
» Scarcity: Why Having Too Little Means So Much
By Sendhil Mullainathan and Eldar Shafir
Published by Times Books
— LouAnn Lofton, email@example.com