• Email
  • Single Page
  • Print

It Captures Your Mind

sunstein_2-092613.jpg
Edward Gorey Charitable Trust
Drawing by Edward Gorey

In this light, it should be easy to see why Mullainathan and Shafir think that scarcity tends to produce more of the same. For example, most of us are susceptible to “the planning fallacy,” which means that we are unrealistically optimistic about how long it will take to complete a project. But busy people are especially vulnerable, since they are attending to their past and current projects and so are “more distracted and overwhelmed—a surefire way to misplan.” Poor people are unlikely to take the time required to understand the small print on low-cost mortgage forms, even if they contain information that they need to understand. They are also more likely to resort to payday loans, which have high fees, and which can create a kind of trap, in which people end up taking out payday loans to pay back their payday loans. The underlying problem is that when people “tunnel,” they focus on their immediate problem; “knowing you will be hungry next month does not capture your attention the same way that being hungry today does.” A behavioral consequence of scarcity is “juggling,” which prevents long-term planning.

Those who live in circumstances of abundance have a kind of cushion, which allows them to avoid depletion. If wealthy people are confronted with a serious economic “shock,” requiring them to spend a great deal of cash on an emergency, their lives are not turned upside-down. With respect to money itself, this point is self-evident, but Mullainathan and Shafir want to draw attention to its psychological and behavioral consequences. When bad surprises occur, those who live under circumstances of abundance (with respect to money or time) do not have to devote a lot of mental energy to them.

Short of creating widespread abundance, can anything be done to reduce the harmful effects of scarcity? Mullainathan and Shafir organize their answer around an arresting story. During World War II, the United States military was faced with a series of “wheels-up” crashes, which occurred when pilots, upon landing, retracted the wheels rather than the flaps. The occurrence of these crashes was a puzzle. Did the pilots suffer from poor training, carelessness, or fatigue? It turned out that the problem was limited to bomber pilots, flying B-17s and B-25s. In those particular planes, the wheel controls and the flap controls looked almost identical, and they were side by side. Pilot errors turned out to be cockpit design errors. A small change in the controls was sufficient to eliminate the problem.

Mullainathan and Shafir think that a lot of problems in life stem from something like cockpit design errors. They want institutions and individuals to make the social environment “scarcity-proof.” To understand their perspective, it is useful to consider the words of the economist Esther Duflo, one of the world’s leading experts on poverty:

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.*

Mullainathan and Shafir seek to identify ways to help people to end up on the right track if they do nothing, or at least much less. One possibility is to make certain outcomes automatic, so that people do not have to think about them at all. For example, many workers are busy, and they do not take the time to sign up for pension plans. In the United States, numerous employers have recently adopted automatic enrollment plans, signing workers up themselves (while allowing them to opt out). There is evidence that in bringing about an increase in savings, automatic enrollment can have an even bigger effect than significant tax incentives. With respect to health insurance, Obamacare requires large employers (those with more than two hundred employees) to enroll employees automatically. For economic planning in general, Mullainathan and Shafir urge that people would greatly benefit from small steps that make certain actions unnecessary (such as, for example, automatic bill payment).

Another approach involves simple reminders. Many people fail to pay bills on time (and thus end up paying late fees). Others forget to make an appointment with a doctor or dentist (and thus risk serious health problems). Still others fail to pay attention when their driver’s license is expiring (and thus risk criminal penalties). Evidence suggests that if people are sent reminders, perhaps by text messages, such problems are significantly reduced. In the same vein, reductions in the burdens of paperwork can substantially increase participation in private and public programs, including those designed to give people financial aid for college and to promote job training. Mullainathan and Shafir think that if they focus on the corrosive psychological consequences of scarcity, individuals and institutions will be able to identify a host of promising reforms.

In providing a unified treatment of those consequences, Mullainathan and Shafir have made an important, novel, and immensely creative contribution. But there is an immediate question, which is whether their real topic is stress rather than scarcity. We might well think that stress is scarcity’s most important psychological consequence, and that it accounts for many and perhaps most of their findings. The point might be right, but stress can occur in the absence of scarcity, and scarcity can occupy people’s minds even if they are not particularly stressed. You might feel stress because people are treating you badly at work, and even if you are happy and stress-free, you might neglect some important matters once you are focused and working contentedly in your “tunnel.” (Some professional athletes do not feel a lot of stress during pressure situations, but they are certainly attending to the task at hand.) It would have been illuminating for Mullainathan and Shafir to offer a detailed discussion of the effects of stress as such, and of the relationship between those effects and their findings, but they are right to say that their topic is a different one.

Mullainathan and Shafir are concerned with those forms of scarcity that produce a kind of intense focus (and in extreme cases, obsessiveness) that makes it difficult or even impossible to attend to other matters. In their account, scarcity leads to particular psychological states, which have behavioral consequences. There is a lot of truth in this account, but I think that it might benefit from greater nuance. Scarcity, as such, is not necessary for those psychological states to occur, and in some cases, it is not sufficient.

Our minds are often occupied by problems that are not naturally seen as ones of scarcity. Perhaps we can say that if John is desperately trying to get time and attention from his romantic partner Jane, John is “Jane-poor.” Perhaps we can say that someone who is struggling with cancer, and can think of little else, is “health-poor.” But it might not be so illuminating to apply the term “scarcity” to a pilot struggling with a poorly engineered cockpit, or a mother who is feeling overwhelmed because her child is failing in school, or a novelist who is entirely absorbed in the task of completing her book, or a political activist who cannot stop thinking about a terrible tragedy in some part of the world. Minds can be occupied in the absence of scarcity.

Is scarcity sufficient to produce a form of tunneling? In cases of real desperation, as with extreme thirst or hunger, it almost certainly is. But some forms of scarcity do not have that effect. The psychological consequences that concern Mullainathan and Shafir need not occur merely because people are poor or busy, or because they have few friends. Unless they are at the very edge of subsistence, people without much money are able to think about a wide range of things; their minds need not be occupied by their economic status. So too, people who are single, or who have few friends, need not be preoccupied by that fact. Some people are doing fine on their own. The association between scarcity, taken as a matter of fact, and “tunneling” varies greatly across people and situations.

Nonetheless, Mullainathan and Shafir are correct to say that in its many forms, scarcity tends to have a series of unfortunate psychological consequences, and that those consequences can seriously disrupt not only people’s performance, but also the very quality of their lives. They are also right to say that some of the most harmful effects of scarcity can be greatly reduced by reforms that simplify tasks and make greater use of automatic solutions. In Washington, D.C., policymakers think a lot about the limits of “bandwidth” when they decide whether to take on new projects. It is not too much to ask them to do the same thing in deciding what kinds of projects to impose on the rest of us.

  1. *

    Susan Parker, “Esther Duflo Explains Why She Believes Randomized Controlled Trials Are So Vital,” Center for Effective Philanthropy Blog, June 23, 2011. 

  • Email
  • Single Page
  • Print