Scarcity is more than an economic idea of there being limited resources to meet everyone’s every need. Having less than what we perceive we need – whether it is food, money, friends or time – is having less than we feel we need. What makes scarcity an important idea for social marketers and other change agents is that it captures the mind; scarcity changes the way we think. Scarcity causes us to ‘tunnel’ – to adopt a mindset that focuses only on what seems, at least at that moment, to matter most. Scarcity, as you might expect, can lead us to do some not so smart things.
That is the core of the book, Scarcity: Why having so little means so much. It extends the insights from behavioral economics beyond the nudges and defaults we are now so familiar with to how we think and feel when we have too little; it changes our thoughts, choices and behaviors. While we recognize how scarcity can make us more attentive and efficient in managing immediate needs – think of the last deadline that was looming over you – it also reduces what the authors refer to as ‘bandwidth.’ They consider bandwidth as a short-hand for our cognitive capacity and executive control that are currently available for use. Simply put, when scarcity captures our mind it helps us focus on doing a better job with our most pressing needs; yet it also makes us less insightful, less forward-thinking and less controlled. The bad news is that the associated reduced bandwidth can lead to more scarcity as we continue to ‘tunnel,’ or neglect other, less immediate concerns that then becomes tomorrow’s, or next month’s or next year’s pressing need. It is the tunneling phenomenon that is the central culprit for poor decision-making and behavior choices.
They illustrate the scarcity and tunneling problems through reference to several studies in both the laboratory and in the field of how poverty is a major contributor to reducing bandwidth. Consider some unsuspecting shoppers in a mall who were asked to imagine a scenario in which they either had (a) a $300 estimate, or (b) a $3,000 estimate to repair their damaged car of which their insurance would pay half the cost. Do they get the car fixed, or take the chance that it will continue to run a little longer? They were given a test of cognitive ability, the Raven’s Progressive Matrices, before being given the scenario and then a few minutes after considering their response. In the $300 scenario there were no significant differences in participants’ test performance, regardless of their reported income level. But as you might now suspect, there were significantly lower scores for the people with lower incomes than for those with higher ones in the $3,000 scenario. The authors’ explanation is simple, yet may provide the insight for many programs serving the poor: the $3,000 scenario got poorer people to consider their own money scarcity (“How could I come up with that?”) and this tunneling (or preoccupation) carried over to their performance on the Progressive Matrices in the post-test. Their performance was, in fact, worse than for people who have been sleep deprived. The authors note that these differences correspond to a drop in IQ of 14 points (a shift in an intelligence score of this magnitude can result in a person of average intelligence being reconsidered as ‘borderline deficient’ – just because of the bandwidth tax imposed by thinking about one’s tight financial situation). The same effect, they show in another study, holds true for farmers in India before harvest (when times are lean) and then after it (they have now been paid for their crops). “We would argue that 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). Other research demonstrates the same effects for people who are dieting or are lonely.
“…preoccupations with money and with time cluster around the poor and the busy, and they rarely let go. The poor must contend with persistent monetary concerns. The busy must contend with persistent time concerns. Scarcity predictably creates an additional load on top of all their other concerns” (p. 62).
Scarcity, and the cognitive load it puts on people who dwell on immediate concerns to the detriment of other issues, literally makes us dumber and more impulsive. Think about that the next time you wonder why people who are poor do some of the things they do – to your utter exasperation. Scarcity forces people to engage in trade-offs; having slack in money and time (disposable income and free time) makes decision-making (and life!) so much easier.
A related paper by Datta and Mullainathan (2012) also discusses ideas of scarcity in a policy development context. They talk more about the limited resources imposed by perceptions of scarcity and suggest some ideas about how to address each of them in program design.
Scarcity of cognitive capacity – Cognitive resources available to people at any moment are limited and can be depleted by their being used for other activities. So increasing the cognitive demands of social change programs (cover more material, require more time spent in classes) may in fact be designing them to be less likely to succeed. The prescription: simplify choices people have to make and encourage rules-of-thumb (heuristics) for decision-making.
Scarcity of self-control – Think of our self-control as a psychic “commodity” of which we have a limited stock, so that using up some for one task (continuing to exercise when you really want to stop) depletes the amount available for other tasks (resisting the dessert at dinner after your workout). The prescription: Defaults; Time Management skills; Making explicit commitments.
Scarcity of attention – Think of attention as another precious commodity – people do not have unlimited attention and might not pay attention to the ‘right’ things – they are busy paying attention to others. The prescription: Prompts and reminders; Incentives.
Scarcity of understanding – People’s mental models of how the world works may be incomplete; not all underlying causal relationships are correctly or accurately understood. The prescription: Framing and tailoring of messages to existing mental models; directly address underlying faulty assumptions.
“From our position of being reasonably well off and comfortable… we tend to be patronizing about the poor in a very specific sense, which is that we tend to think, “Why don’t they take more responsibility for their lives?” And what we are forgetting is that the richer you are the less responsibility you need to take for your own life because everything is taken care [of] for you. And the poorer you are the more you have to be responsible for everything about your life…. Stop berating people for not being responsible and start to think of ways instead of providing the poor with the luxury that we all have, which is that a lot of decisions are taken for us. If we do nothing, we are on the right track. For most of the poor, if they do nothing, they are on the wrong track. – Esther Duflo
Scarcity, tunneling and bandwidth. Good points to be reminding ourselves of as we talk with people among our priority groups and set out to design programs that will help them solve their real problems.
Datta, S. & Mullainathan, S. (2012). Behavioral Design: A New Approach to Development Policy. CGD Policy Paper 016. Washington DC: Center for Global Development.
Mullainathan, S. & Datta, S. (2013). Scarcity: Why having so little means so much. New York: Times Books.
Parker, S. (June 23, 2011). Esther Duflo Explains Why She Believes Randomized Controlled Trials Are So Vital, Center for Effective Philanthropy Blog, June 23, 2011
Image credit: Freddy Olsson.