Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

Imagine that the two of us—Sendhil and Eldar—are invited to a picnic. Sendhil has to bring fruit for a fruit salad, and Eldar’s job is to bring the jellybeans. Sendhil must carefully consider how best to pack: one watermelon and much of the space in his bag is taken. And even the pineapple makes it hard to fit much else. Maybe he can align some bananas around the edges or fit a few grapes or strawberries in between the apples and the pears. There are nontrivial logistics to his packing problem: finding the best arrangement is a challenge. Contrast this with Eldar’s much simpler task. He simply pours in some watermelon-flavored jellybeans and some orange. He shakes his bag to let the pile settle, then pours in a few other flavors. Eldar may also have to make some trade-offs; he may not be able to fit all the flavors he wants. But once he has made his choices, his packing is inherently easier. No ingenuity is required to pack the jellybeans. What distinguishes the two tasks is granularity. The fruit are bulky items, whereas the jellybeans are small, almost like grains of sand. The complexity of packing gets easier as the items get more granular. In life, do you pack grains or bulky items? It depends on your budget. On a small budget, that iPod feels bulky, taking up a large fraction of what you will spend this month. As your budget grows, the iPod takes up less and less room. It becomes a smaller and smaller fraction of your disposable income—it gets more and more granular. ...