Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

Researchers now better understand the psychology of choking. Many actions in sports can be done either consciously or automatically. You can think about your arm’s movement while shooting a free throw. You can focus on the follow-through motion of a golf swing. Or you can just do it automatically, with your mind blank.

automatically. In fact, they are better at doing them automatically. (Next time you run down the stairs, think about the movement of your feet. But please do not hold us accountable if you come close to tripping. Though you are a professional stair user, thinking about the task will make you much less effective at it.)

At this level of skill, extra focus prevents muscle coordination from happening in the quickest, most natural way. Athletes choke because they focus.

Choking is the tip of a much broader phenomenon. Psychologists have found across a wide variety of tasks that performance and attention, or arousal, are linked by an inverted U-curve.

gave him far too much time to think. To make matters worse, the more you try not to think about it, the more you do. Psychologists call this an ironic process. When asked to not think of a white bear, people can think of little else.

Poverty is surely the most widespread and important example of scarcity. The breadth and depth of poverty in the modern world is striking. UNICEF estimates that 22,000 children die each day due to poverty.

Nearly 50 percent of all children in the United States will at some point be on food stamps. About 15 percent of American households had trouble finding food for the family at some point during the year.

This discussion clarifies what we mean by poverty. We mean cases of economic scarcity where changing what you want, or think you need, is simply not viable. Some of these hard-to-change needs are biological, such as hunger for the subsistence farmer, and some are socially constructed.

Poverty is extreme in another way. Consider the parents of a newborn, who are suddenly time scarce. They also do not have the option to “want less”; the baby needs to be taken to the doctor, and fed, and changed, and cuddled, and bathed, and rocked (forever) to sleep. There are just so many nondiscretionary activities to juggle. But if you are a parent with money, your time scarcity can be alleviated in another way.

You can hire a nanny or a maid, order in food rather than cook, use an accountant, employ a gardener, all of which will free up time. Similarly,

The reverse—trying to alleviate the scarcity of money—is much harder.

Less money means lower quality and less healthy food. Poverty means scarcity in the very commodity that underpins almost all other aspects of life.

Having known what it’s like to badly need a little more time, we might start to imagine what it’s like to desperately need a little more money or even more friends.

Nonadherence affects many people, but it is particularly concentrated in one group: the poor. While people at every income level may fail to take their medications, the poor do so most often. Disease after disease—HIV, diabetes, tuberculosis—the same pattern repeats itself. No matter the location, the kind of medication, or the side effects, one thing stays the same: the poor take their medication least consistently.

Still, one prevailing view explains the strong correlation between poverty and failure by saying failure causes poverty. Our data suggest causality runs at least as strongly in the other direction: that poverty—the scarcity mindset—causes failure.

Consistency requires constant attention, effort, and steadfastness.

Good parenting generally requires bandwidth. It requires complex decisions and sacrifice.

This is important because so many of our behaviors, not just parenting, rely on bandwidth. For example, an overtaxed bandwidth means a greater propensity to forget. Not so much the things you know (what psychologists call declarative memory), like the make of your first car, but things that fall under what psychologists call prospective memory—memory for things that you had planned to remember, like calling the doctor or paying a bill by the due date. These tasks must be maintained alive in your head, and they get neglected when your bandwidth is reduced. Is it any surprise then that the poor fail to take their medications? Some may find this hard to believe: how can you forget something so important? But memory doesn’t work that way. You don’t remember as a function of long-term value. Certainly no one forgets to take painkillers: the pain is a constant reminder. Diseases such as diabetes, though, are “silent”; their consequences are not immediately felt. There is nothing to remind a person with an overburdened bandwidth to take those medications.

Absorbing new information requires working memory. The bandwidth tax also means that you have fewer mental resources to exert self-control. After a long day hard at work, are you likely to floss? Or will you say, “Never mind, I’ll do it tomorrow.” To

We see this in the data on smoking: smokers with financial stress are less likely to follow through on an attempt to quit.

One study found that when low-income women were moved to higher-income neighborhoods, rates of extreme obesity and diabetes dropped tremendously; other factors may have played a role, but a reduction in stress is almost certainly part of the story.

Sleep research shows you are not alone. In one study, thirty-eight good sleepers were instructed to go to sleep as quickly as possible. Some of them were told that after the nap they would be giving a speech. Most people really do not like to give speeches. Indeed, this group had far more trouble falling asleep and slept less well when they did. Other data on insomniacs show that they are more likely to be worriers. Put simply, it is hard to sleep well when you have things on your mind. This is perhaps the most pernicious, long-term detrimental way in which scarcity may tax bandwidth: thoughts of scarcity erode sleep.

Perhaps the best analogy is this: Think of talking to someone who is clearly doing something else, say surfing the web, while talking to you. If you did not know what they were doing, how would they seem to you? Daft? Confused? Uninterested? Not all there? A bandwidth tax can create the same perception. So if you want to understand the poor, imagine yourself with your mind elsewhere.

Even after receiving instructions, few would avail themselves of the computers on site to format their résumés or of the offers to procure more appropriate clothing. When interviews were finally scheduled, clients would arrive without résumés and would not bring their “A” game. In many cases they simply failed to show up. But the designers of these social programs rarely take the perspective that Chapanis took. Rather than look inside the cockpit, they have assumed that the problem lies with the person. They assume the problem is a lack of understanding or of motivation. So they follow up with attempts to educate or to sharpen incentives. In developed countries, this leads to a discussion of a “culture of welfare.” One solution has been to place a lifetime limit on the number of years that a person can receive welfare.

But why not look at the design of the cockpit rather than the workings of the pilot? Why not look at the structure of the programs rather than the failings of the clients?

Why not design programs structured to be more fault tolerant?

And much of it does not sit so well with being a student. Skipping class in a training program while you’re dealing with scarcity is not the same as playing hooky in middle school. Linear classes that must not be missed can work well for the full-time student; they do not make sense for the juggling poor.

fault tolerance

On the contrary: fault tolerance is a way to ensure that when the poor do take it on themselves, they can improve—as so many do. Fault tolerance allows the opportunities people receive to match th...

it allows hard work to yield better returns for those who are up for the challenge, just as improved levers in the cockpit allow the dedicated pilot to excel. It is a way to ensure that small slipups—an inevitabl...

Remember the lifetime limits on welfare payments discussed earlier? They were based on a belief that cycling in and out of welfare was due to a lack of motivation on the part of the poor. People went on and off of welfare, it was said, because the system made it too easy not to work.

A long-term limit, like a distant deadline, becomes pressing only as it approaches, toward the end. To those who are currently juggling and tunneling, the limit, years away, will reside outside the tunnel, until it is very near.

aid. In a way, it is the worst of all possible arrangements: it penalizes but fails to motivate.

There is a general lesson here for how (and how not) to structure incentives. Incentives that fall outside the tunnel are unlikely to work.

For an incentive to work, people must see it. And most incentives, unless designed well, risk falling outside the tunnel, rendering them invisible and ineffective.

We never ask, Is this how we want poor people to use their bandwidth?

When we design poverty programs, we recognize that the poor are short on cash, so we are careful to conserve on that. But we do not think of bandwidth as being scarce as well. Nowhere is this clearer than in our impulse to educate.

We treat education as if it were the least invasive solution, an unadulterated good. But with limited bandwidth, this is just not true. While education is undoubtedly a good thing, we treat it as if it comes with no price tag for the poor. But in fact, bandwidth comes at a high cost: either the person will not focus, and our effort will have been in vain, or he will focus, but then there is a bandwidth tax to pay. When the person actually focuses on the training or the incentives, what is he not focusing on? Is that added class really worth what little quality time he managed to spend reading or with his children? There are hidden costs to taxing bandwidth.

And even when we do decide that educating is the right thing, there can be ways to do so and still economize on bandwidth, as illustrated in a study by the economist Antoinette Schoar and her coauthors.

They, too, were not engaged in complex accounting, but they did what the less successful entrepreneurs did not do: they followed good rules of thumb. For example, several would put the cash from their store in one register and pay themselves a fixed salary.

Schoar collected the best rules of thumb and designed a different “financial education” class based on them.

Now imagine that we offer you a highly subsidized daycare program. What exactly are you getting for it? Surely we are saving you time shuttling your kids back and forth. We might be saving you money as well, either explicitly (this program is cheaper than your previous one) or implicitly (if we account for your grandmother’s time). But we would be giving you something else, even more precious. Something you could spend on many things. We would be giving you back all that mental bandwidth that you currently use to fret, worry, and juggle these arrangements. We’d be taking a cognitive load off. As we’ve seen, this would help your executive control, your self-control more broadly, even your parenting. It would increase your general cognitive capacity, your ability to focus, the quality of your work, or whatever else you chose to turn your mind to. From this perspective, help with child care is much more than that. It is a way to build human capital of the deepest kind: it creates bandwidth.

Was the mother able to work more hours; was she less tardy? This, however, may be far too narrow a perspective. What the program produces is freedom of mind, greater bandwidth, not something that’s easy to measure. If the program is successful, its benefits should show up in many contexts.

Does working memory improve? Do impulse control and self-control improve? Some of our pessimism about existing programs might come from a failure to appreciate and therefore measure such impact. If we look too narrowly at this child-care program, we will miss many of its broader benefits.

And we were amazed by the high demand for loans that averaged less than $10.

The scarcity trap begins with firefighting and with tunneling, doing things that have tremendous costs lurking outside the tunnel.

We can also go back to the source. Income flows are often lumpy and volatile in the developing world, because workers lack formal, steady employment.

Even in developed nations, many low-income individuals who are employed face a great deal of volatility in incomes and earnings. As we saw earlier, income volatility is a major source of the ...

For a poor farmer, a sick cow can reduce daily income enough to cause a slide into a scarcity trap. We should therefore look to insure the poor against these apparently “small” shocks. In the United States, something as simple as inconsistent work hours (this week you work fifty hours, but next week you get only thirty) can cause juggling and perpetuate scarcity. A solution would be to create the equivalent of unemployment insurance against such fluctuations in work hours, which to the poor can be even more pernicious than job loss.

This points to the great potential value in finding ways to buffer against such shocks. One way is to create financial products that help the poor build savings slack.