Scarcity Book Summary - Scarcity Book explained in key points

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Scarcity summary

Name: Scarcity
Rating: 4.1 (35 reviews)
Author: Sendhil Mullainathan and Eldar Shafir

Sendhil Mullainathan and Eldar Shafir

Why Having Too Little Means So Much

4.1 (35 ratings)

15 mins

Table of Contents

Scarcity
summarized in 8 key ideas

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Key idea 1 of 8

What’s in it for me? Learn how to best navigate times of scarcity.

Think about the last time your debt began piling up, or when deadlines started mounting for a long line of important projects. How did you feel? Were these moments where you got your best work done, made your best purchasing decisions or did your best budgeting?

Even though these stressful, pinched periods require us to be at our sharpest, the reality is that the perception of scarcity makes us even worse at dealing with these pressing problems.

In fact, the coping mechanisms we draw upon during times of scarcity actually worsen our situation, further entrenching us in our predicament. Therefore, it’s vital to understand how and why we respond to scarcity in the way that we do, in order to develop proactive strategies to deal with it.

After reading these blinks, you’ll discover

why becoming distracted at your daughter’s softball game doesn’t make you a bad parent;
why the wealthy are only sometimes interested in saving $50; and
why firemen should wear seat belts.

Many problems in society are linked by the concept of scarcity.

What do the tragedy of global poverty and the difficulties of sticking to yet another fad diet have in common? At first there doesn’t seem to be any link; in fact, they seem to be contradictory in every way.

Yet upon closer inspection we discover that they are both consequences of the same malaise: scarcity.

In fact, scarcity, defined as “having less than you feel you need,” is the link that connects many of the seemingly unrelated problems we face every day. This isn’t physical scarcity, as in the literal unavailability of objects, but rather the feeling of not having enough, whether it’s time, money, food or even something more abstract like education.

Imagine a world-class chef who, having spent her entire life perfecting her craft, must create her best dish in less than two hours for a TV show, under intense time pressure. Here, time is scarce, and she doesn’t feel she has enough minutes for what she needs to do.

The chef’s feeling of scarcity is essentially the same as that of the dieter who’s struggling to eat less than he’s accustomed to. To him, scarcity is the amount of calories he feels he’s missing from his meals.

However, to a certain degree we can control our experience of scarcity by using something called a critical safety valve. For example, if you’ve overcommitted to work projects, your safety valve might mean missing a few deadlines. Or if you’re on a diet, you can take a break and have a slice of pizza. In this way, you are choosing how much scarcity you have to face.

But not everything has a critical safety valve. If you’re poor, you can’t just decide to be rich for a day to alleviate the pressure. This lack of freedom to manipulate your situation means that poverty represents a particularly extreme form of scarcity. Regardless, the actual experience of scarcity is the same.

When faced with scarcity, our mind focuses closely on the thing we think we are missing.

When you’re hungry, food is all you can think about. This is because food – at that moment, even only for a few minutes – is scarce and the need to satiate your appetite is almost overwhelming. Even if we aren’t aware of it, when we experience scarcity of any kind, not just the kind regarding our biological needs, we become absorbed by it, obsessing over what we feel we lack.

Toward the end of World War II, as the Allies advanced further into German-occupied territories, they faced the problem of bringing back concentration camp inmates from the edge of starvation. To solve this problem, the University of Minnesota conducted an experiment with 36 male subjects in which the subjects were first starved and then underwent various feeding regimens. The findings helped the camp survivors, and also revealed some fundamental insights.

Scarcity forces us to myopically focus on immediate concerns and neglect others.

As you look through your wallet, you stumble across a coupon with no expiration date for a free meal at a restaurant. This time, like every other time you see your coupon, you think: “Eh, I can use this any time. Not today, but maybe next week.” Consequently, it never gets used.

This is actually quite common: coupons with no expiration date are less likely to be used than those that have one. But why?

Scarcity reduces “bandwidth,” our ability to manage and compute information.

The deadline for your presentation is tomorrow. But your daughter has her city championship softball match tonight. Like a good parent, you go to her match, but you just can’t focus on the game, can’t enjoy yourself – your mind keeps wandering back to that presentation. Why can’t you just enjoy the moment?

This is because scarcity taxes our bandwidth and, as a result, inhibits our most fundamental capacities, such as concentrating on that softball game.

Scarcity is a vicious circle that is very difficult to escape unless we have some slack.

How many times have you felt like you’re playing catch-up with your debts, only to find yourself in exactly the same hole as you were before?

Scarcity is partly the result of an aspect of human behavior known as the scarcity trap. When we fall into the scarcity trap, two things happen: we constantly juggle, moving from one pressing task to the next, and yet are continually one step behind.

Scarcity makes us experts at valuing the small benefits as well as the big.

Have you ever poured from an unusually shaped bottle, only to find there was far more liquid inside than you thought was possible? This is because your perception was wrong – if you were to do it again, however, you’d probably measure it more accurately. Indeed, expertise – learning from our experiences – can alter our perception.

For instance, if a layperson were to pour you a shot of whiskey from each of four differently shaped bottles, you’d likely end up with four different-sized shots. However, an experienced bartender is far less likely to be influenced by the bottles’ shapes, thus making all four whiskey shots uniform.

Our inability to think about the future and our focus on present problems lead to bad decisions.

How many times have you considered taking out a loan when your cash has run out? While you’re certainly not the only one to toy with the idea, it’s actually the most short-sighted thing you can do.

Unfortunately, scarcity causes us to make rash decisions with little regard for their long-term consequences. When we’re intensely focused on putting food on the table, for instance, we’re less effective at planning for the future. Of course, planning in general is difficult for many, but scarcity makes the problem worse.

Curb the negative effects of scarcity by redesigning programs, adding slack and reducing bandwidth.

Whether it’s improving the lives of the poor, managing scarcity in organizations or dealing with scarcity in everyday life, the strategy is always the same: change the programs, add in slack and reduce bandwidth.

Whatever the area, you can always improve your program in a way that mitigates the effects of scarcity on everyone. Take university students, for example, who often have to manage the scarcity of time. They often miss classes because of deadlines they have for projects for other classes, but this could be solved with a simple restructuring of the classes themselves.

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What is Scarcity about?

Scarcity makes the compelling case for the amazing impact that the perceived lack of vital resources – whether time, money or even friendship – has on our lives. It builds its case from fascinating scientific research which reveals how the feeling of scarcity can influence our decision making and even change the way we perceive the world.

Who should read Scarcity?

Behavioral economists and students
Policy makers
Anyone struggling to get out of a rut, be it poverty, obesity or time management

About the Author

Sendhil Mullainathn is a professor of economics at Harvard University, and a recipient of the MacArthur Foundation’s Genius Grant.

Eldar Shafir is William Stewart Tod Professor of Psychology and Public Affairs at Princeton University, where he specializes in inference mechanisms, judgement, decision making and other economic behavior.

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