Book review: Scarcity

I just finished reading Scarcity by Sendhil Mullainathan and Eldar Shafir. The subtitle is "The new science of having less and how it defines our lives". Scarcity is of course the central theme of economics, and features in many textbooks' definitions of the discipline. However, there is a key difference between the sort of scarcity that economics considers, being the idea that we have limited resources with which to satisfy unlimited wants and desires, and the sort of scarcity that Mullainathan and Shafir are discussing. 

The scarcity that the book considers is much more extreme and in-your-face. It doesn't simply enforce a need to make choices, it defines the alternatives that people choose. In Mullainathan and Shafir's view, it is the "feeling of scarcity" that "taxes our bandwidth", capturing the minds of those facing scarcity and limiting their ability to achieve their goals across multiple domains. People facing scarcity have a tendency to "tunnel", focusing intently on their scarcity. This can have positive effects (a "focus dividend") as it concentrates our cognitive resources on the task at hand. However, it causes us to neglect things that are outside the tunnel. As Mullainathan and Shafir note:

Scarcity alters how we look at things; it makes us choose differently. This creates benefits: we are more effective in the moment. But it also comes at a cost: our single-mindedness leads us to neglect things we actually value.

Much of the book is set up to describe how scarcity affects people's lives. This information was interesting, but I felt it was drawn out a bit too much. It culminates in a description of "scarcity traps", which Mullainathan and Shafir neatly summarise:

Tying all this together, we see that scarcity traps emerge for several interconnected reasons, stretching back to the core scarcity mindset. Tunneling leads us to borrow so that we are using the same physical resources less effectively, placing us one step behind. Because we tunnel, we neglect, and then we find ourselves needing to juggle. The scarcity trap becomes a complicated affair, a patchwork of delayed commitments and costly short-term solutions that need to be constantly revisited and revised. We do not have the bandwidth to plan a way out of this trap. And when we make a plan, we lack the bandwidth needed to resist temptations and persist. Moreover, the lack of slack means that we have no capacity to absorb shocks. And all this is compounded by our failure to use the precious moments of abundance to create future buffers.

I found myself nodding along with many of the points that the book makes. However, I'm not sure that I have fully absorbed all of the key points. I think one key takeaway that I wish the book had made would be to be kind to one another - we don't know what is taxing other people's bandwidths. When someone lets us down or is unable to perform as we think they should (like our students, for those of us who are teachers), it may reflect only their capacity in the moment, and not their general capability. That suggests we should perhaps adopt a more compassionate approach than many of us do (and is something my wife is much better at in her teaching, than I am in mine).

If there was one disappointment with the book, it was the final sections, which attempted to provide some solutions to the problems associated with feelings of scarcity. The solutions seemed incredibly context-specific and not at all generalisable - for example, at times the solution to tunneling is to add things into the tunnel, but at other times the solution is to get things out of the tunnel. I guess this just reflects the state of the literature at the moment, and that even if we know that scarcity is a problem, we haven't found workable general solutions as yet.

Another aspect of the book that could have been strengthened was the links to behavioural economics. These were few and far between, but it seems to me that this was an opportunity lost. In particular, the focus of the latter sections could easily have been reframed to take advantage of additional perspectives. I'll note some more on this in a follow-up post shortly.

Having said that, the book was definitely thought-provoking and an interesting read. I do enjoy reading books in the intersection of psychology and economics, and this book fits right into that field.