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  • Social Interactions, Identity & Well Being

Shafir’s new book explores consequences of scarcity

by CIFAR Apr 11 / 13

In September, Eldar Shafir released his book Scarcity: Why Having Too Little Means So Much to widespread public interest. The book examines how too little of something – whether it be food, time or money – affects our thinking, and can affect our ability to make good decisions.

Photo courtesy of Eldar Shafir.

Shafir is a Senior Fellow in CIFAR’s Social Interactions, Identity and Well-Being program and a professor at Princeton University. He co-authored the book with Sendhil Mullainathan of Harvard University.

Q. Your book has been widely reviewed and commented on since it appeared in September, with reviews in the Guardian, The New York Review of Books, The Boston Globe and elsewhere. Have you been happy with its reception?

Yes, it has been satisfying to see the mostly very favorable reviews. My biggest fear was that some journalists, without really reading the work, would report that “these guys from the Ivy League say the poor are stupid.” Thankfully, that just hasn’t happened. People seem to have understood our findings, and their implications.

Q. How did you become interested in writing a book about scarcity?

We were originally interested in the poor, in how decisions are made in contexts of poverty. But as our research progressed we realized that we were seeing patterns that were much more general, a psychology that emerges when people “do not have enough” – not enough money, not enough time, or food, or friends. And that turned our book into a look at scarcity more generally, at how decisions are made, or fail to be made, in contexts in which people feel a scarcity of resources.

Q. Common sense tells us that when something is scarce we care more about it. But your book goes beyond that. Can you tell me what scarcity does to our minds?

We find that people tend to focus on what they feel they don’t have enough of. They focus on time when they’re busy, on money when they’re poor. And, not surprisingly, they do quite well when they focus. The busy can be time efficient; the poor use their dollar more carefully and more thoughtfully than the rich. But under scarcity people don’t just focus – they “tunnel.” They focus on their source of scarcity so heavily that they end up ignoring much of what’s on the periphery.

That includes things on the periphery that are largely unrelated to the topic under focus; for example, you might be focusing on your finances and forget to take your meds. But it can also involve things on the periphery that are closely related to your problems: you tunnel on managing this month’s overwhelming expenses, and you take a loan that can alleviate the problem, ignoring the repercussions of the exceedingly high interest fees two weeks down the road.

Q. How is that different than our common sense understanding of scarcity?

Well, we all assume that scarcity brings unhappiness and occasional frustration. The main lesson coming from our work is that beyond all that, it just depletes cognitive resources, leaves you with less bandwidth, with less mind for other aspects of your life. There’s a deep irony: scarcity presents you with more complex problems, and leaves you with lesser resources to deal with those problems.

Q. You write that you can actually observe these effects in the laboratory.

We ran one study with Princeton University students, a highly educated and talented group, whom nobody would pick as candidates for myopic decision making. We had them play some computer-based games for money. And we made some of them “rich” in time – they had plenty of time on each turn and we made others “poor” in time – they had not quite enough time to play each turn comfortably. In addition, in some versions they could borrow additional time if they wanted, at very high interest: for each additional second they took, they lost two seconds from their total allotment of time.

And what we found was that the rich – those who had enough time – refrained from the high-interest borrowing, and did quite well. But the poor – those who were playing in a context of time scarcity – tunneled on trying to do better, resorted to the predatory loans, and left the lab with lesser pay than if they hadn’t borrowed. The same kids who when rich played quite wisely, made myopic decisions and lost pay when they were poor.

Q. Do the effects you explore in your book have implications for how we think about poverty?

Absolutely. What we find falls clearly on the side of the debate that argues that many of the problematic behaviors we observe among the poor are due not to poor people, but to people who are living in poverty. The same person who is thoughtful and controlled when she has enough, tunnels and makes mistakes and looks less competent when she experiences scarcity.

Q. What does this suggest about the way to tackle the problem of poverty? Do you have prescriptions?

Poverty, of course, is a multi-faceted problem, that correlates with lower education, less good health, more dangerous and noisy neighborhoods, and much more. We are not purporting to be able to solve it all. But what we are finding suggests that simply taxing people’s bandwidth less, making the challenging lives of the poor a bit more manageable – be it through more friendly and helpful banking, predictable pay days, more available childcare, more reliable transportation, etc. – can lead to significant improvements. And notice: the proposal is not to absolve people of personal responsibility. On the contrary: When the context is just plain overwhelming, most will fail. It’s by designing a context that’s a bit more manageable that you can allow those who care and are trying hard to succeed.

When we can pay less attention to juggling everyday problems, we have more mind left for other aspects of our lives. What’s so interesting is that it’s the same limited bandwidth we use to balance our chequebooks, and remember to take our medications, and attend to and remain patient with our children, etc. And that means that as you liberate some bandwidth in one area, say by making my budgeting easier, you might observe improvements in another, say, in my adherence to medication, or time spent reading to my children.

Q. That’s the approach ideas42 takes?

Yes. ideas42 is a non-profit research and development organization we founded a few years ago that’s dedicated to applying behavioral principles to solving societal problems and hopefully making the world a slightly better place. Whether it’s in finance, health, education, or the environment, we try to understand what some of the behavioral obstacles or problems might be and apply behaviorally informed solutions in attempts to alleviate them.