What does the 'scarcity mindset' have to do with poverty?


No debate around the Indian economy is complete without a reference to the very real issue of continued poverty. In this context, a new book 'Scarcity: Why Having Too Little Means So Much' written by a Harvard economist and a Princeton psychologist has an interesting ring to it.




Here is an excerpt of its review from the New York Review of Books:

"Economists focus on the problem of scarcity—on how people allocate their resources (including both time and money) in the face of many competing demands. In their extraordinarily illuminating book, the behavioral economist Sendhil Mullainathan and the cognitive psychologist Eldar Shafir explore something quite different, which is the feeling of scarcity, and the psychological and behavioral consequences of that feeling. They know that the feeling of scarcity differs across various kinds of experiences and that people can feel “poor” with respect to money, time, or relationships with others. 

But their striking claim, based on careful empirical research, is that across all of those categories, the feeling of scarcity has quite similar effects. It puts people in a kind of cognitive tunnel, limiting what they are able to see. It depletes their self-control. It makes them more impulsive and sometimes a bit dumb. What we often consider a part of people’s basic character—an inability to learn, a propensity to anger or impatience—may well be a product of their feeling of scarcity. If any of us were similarly situated, we might end up with a character a lot like theirs. An insidious problem is that scarcity produces more scarcity. It creates its own trap."

The economist, too, has reviewed the book, which sounds less impressed but still has interesting stuff to say about it:

"Indian sugarcane farmers score worse on intelligence tests before the harvest (when they are short of cash) than after. Feeling poor lowers a person’s IQ by as much as a night without sleep. Anxieties about friendlessness have a similar effect. In one experiment a random group of people were told that their results on a personality test suggested a life of loneliness. This random subset subsequently performed worse on intelligence tests and found it harder to resist the chocolate-chip cookies provided for them.
By making people slower witted and weaker willed, scarcity creates a mindset that perpetuates scarcity, the authors argue. In developing countries too many of the poor neglect to weed their crops, vaccinate their children, wash their hands, treat their water, take their pills or eat properly when pregnant. Ingenious schemes to better the lot of the poor fail because the poor themselves often fail to stick to them. The authors describe these shortcomings as the “elephant in the room”—which poverty researchers ignore because it is disrespectful to the people they are trying to help. But if these so-called character flaws are a consequence of poverty, and not just a cause of it, then perhaps they can be faced and redressed." 
From the sound of it, the book sounds like it is saying something audacious about scarcity - that it exists in the mind as much as due to genuine resource constraints. Something the more esoterically inclined might claim the first credit for.
Read the full review on NY Review of Books here.
Read the full review on the Economist here.

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