During the ongoing debate about food stamps, many detractors have deployed anecdotes about "standing in line behind someone buying X with food stamps"—where X is an "inappropriate" purchase, in the critic’s opinion.
This event is used to show that poor people spend foolishly, causing or at least exacerbating their poverty. Partially propelled by such intuitive assumptions of cause-and-effect, this is understandably a hot topic. In "Scarcity: Why Having Too Little Means So Much," the book’s authors shed some much needed light on this economic dispute.
They found just the opposite: Too often, people aren’t poor because they make bad decisions; they make bad decisions because they are poor. Poverty is just one aspect of a more fundamental circumstance—scarcity, defined as a lack of resources to meet expected needs. Time and wealth, can be scarce. The lonely have social contact scarcity.
Human brains respond to all these deficiencies similarly. Because it’s relative and not absolute, economic scarcity can also occur at any income level. And it’s about to happen to many of us, which makes these findings worthwhile.
Farmers’ profit projections have ag economists alarmed. Their admonitions are seemingly dismissed because 1) average predictions don’t apply to me and 2) the memory of relative abundance is too fresh.
However, if those warnings prove true, we can be prepared. Scarcity changes thinking patterns predictably. First, our cognitive skills will take a hit. Crudely put, we’ll become dumber by about 13 IQ points. The authors used poor Indian sugar farmers to calculate this effect. Before harvest, when the income from the prior crop had dwindled, farmers performed lower on intelligence tests than after harvest and being paid.
We’ll be less able to focus on finding answers as collapsing margins will never be far from our mind, and relentless market data will distract us.
More surprisingly, our executive skills will decline. Just when you need self-control, "firefighting" immediate problems will deplete it. As we stare at our budgets, we prime our brains with feelings of scarcity. In turn, we—like poor people with food stamps—can make decisions we would otherwise consider shortsighted or foolish.
Alleviate Your Brain. There are no easy countermeasures, but we know a few behaviors that help mitigate the brainwidth-scarcity problem.
Sleep—as obvious as it sounds, sleep restores cognitive and executive brainpower. Twenty-hour work days are like taking "stupid pills." If anxieties intrude on good sleep, seek medical advice.
Break long deadlines/goals into a series of more immediate milestones. In a world of scarcity, long deadlines are a recipe for trouble.
Build slack into your budget and schedule. Having some capacity to absorb inevitable surprises without falling hopelessly behind helps avoid the worst of the scarcity trap. When you are not tightly packed for resources or time, fight the feeling that you are somehow not doing enough.
- March 2014