Book Review - Scarcity: Why Having Too Little Means So Much

"The problem is not the person but the context of scarcity"

Mullainathan and Shafir introduce a new way of thinking about the impact of scarce resources in Scarcity. The book is explains how having less to accomplish a certain goal forces us to ignore other goals. The compounded effect of this ignorance leads to a lifestyle defined by lesser resources for all goals, at all times. If this resource is time, it describes the busy, if this resource is money, it describes the poor. Both conditions lead to ignoring other goals, ones that are not immediate. The authors emphasize how irrespective of whether the initial scarce resource is time, money or something else, it leads to a scarcity of bandwidth for other priorities, this in turn leads to inefficiencies and threatens to trap the individual in their busy or poor state.

Scarcity is about familiarizing the reader with some of the mechanics of a mind faced with shortage of a resource. The authors demonstrate how the cognitive performance of an individual changes with their financial state. This leads to individuals taking higher risks, borrowing and planning less for the future. They emphasize how this is a generic human behavior, not a phenomenon endemic to a subsection of the population. The poor are not necessarily bad at managing their finances, they just don’t have the mental bandwidth to take the longterm view of their finances. Similarly, the busy are not bad at prioritizing, they just don’t have the mental bandwidth to take stock of all their current and future priorities. Adopting this attitude can help provide more effective improvements to the situation of the poor and the overly busy.

Scarcity proposes to a new way to look at age-old issues. It suggests that maybe what we deigned as causes (lack of analytical and cognitive skills) are in fact the symptoms of these issues. Therefore, we should seek a solution for them instead of blaming them. The authors bring together the perspectives offered by economics and psychology, to present a more holistic picture of a mind living in scarcity.