Matt’s Reviews: Scarcity: Why Having Too Little Means So Much by Sendhil Mullainathan and Eldar Shafir

Scarcity: Why Having Too Little Means So Much by Sendhil Mullainathan and Eldar Shafir is a very interesting read on how scarcity affects our mental bandwidth and reduces our intelligence and judgement among other things. This applies to any type of scarcity: not enough time due to an overburdened schedule, loneliness due to reduced human contact, and of course, probably the most prevalent around the world, not enough money and other resources for everything you want (or need) to do.

They show research that, when in a ‘scarcity mindset,’ the mind does not work as well. It tends to focus primarily on the single scarcity with a tunnel vision that leads it to miss other things. Often those other things would be things that could be more long term help to reduce the scarcity, but they just don’t reach the level to take action. This has compounding consequences on those living in scarcity.

One study had people imagine an unexpected car repair that would cost them $1500, and tested them on basic IQ type questions before and after this exercise. Folks with large incomes did as well before and after imagining the extra cost. Folks who were low income had an additional ‘money scarcity mindset’ and this actually dropped their scores about the equivalent of 20 IQ points. Just being reminded of the possibility of unexpected expenses led them to think about it in such a way that it reduced their overall mental bandwidth.

This reduction in bandwidth not only led to lower performance on IQ type questions, it also led to poorer ‘executive function’ and decision making. In fact sometimes the very programs trying to lift people out of scarcity (e.g. poverty) actually further reduce their mental bandwidth leading to further failures.

For example, someone out of work struggling to make the next payment is given the chance to learn new skills in a training program. Now their mental bandwidth that has already been reduced from just dealing with poverty and unemployment gets further impacted by trying to learn new skills. The combination leads many of them to not feel successful at the new learning and that may lead to missing a class, putting them farther behind, etc.  Many folks do not even have the mental bandwidth to complete the application process for these types of training programs.

Scarcity leads to reduced performance that often leads to more scarcity that leads to even more reduced performance. Living in scarcity leads to poorer mental performance and less effective executive functions. This leads to poor choices, or a complete lack of choices and stagnation. It leads to a reduction in follow through on the very things that could help them reduce their own scarcity.

This is an important book. If we can find ways to reduce the scarcity in our lives and the lives of others, it may give us the bandwidth to allow us to further help ourselves and further reduce our own scarcity and that of society at large.