Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

Without the luxury of slack, we come to understand the value of each inch of space in our suitcases. The poor ought to know the value of a dollar, the busy the value of an hour, and dieters the value of a calorie. Marketing researchers have studied this expertise in a very specific way. They stop shoppers exiting a supermarket for a quick survey. They take the shoppers’ receipts and ask questions like, “How much was the Crest toothpaste you just bought?” Affluent shoppers do not do well on this quiz. “The price of the Crest toothpaste? Something like three dollars? Maybe five?” Most don’t even know how much they spent in total, the size of the bill they had just paid minutes before. But the lower-income shoppers do. They are more accurate in knowing both how much they spent and the prices of the items they bought. We found this in a study of our own, which we devised carefully so as to separate knowledge from frequency of experience. We asked commuters in Boston the fare at which the taximeter starts. The rich gave the correct answer only 12 percent of the time; the less affluent were correct three times as often. This despite the fact that the rich take taxis much more frequently. Knowing prices often involves more than just reading the label. It requires vigilance since what you see is often not what you pay.