The Psychology of Scarcity: What Behavioral Economics Can Teach Design

Professor Eldar Shafir explains how scarcity and abundance affect our actions as individuals and communities—and what that means for designers.

Even as we deal with the strain on our resources—energy, water, clean air—the gap between those who have access to these resources and those who don’t continues to widen. As some sections of society agree that we simply have too much stuff, that production of many items is fast approaching a peak—how many cars, for example, does the world need in total?—other groups of people deal with the crippling reality of a resource crunch. Eldar Shafir, professor of psychology and public affairs at Princeton University and coauthor, with Sendhil Mullainathan, of the book Scarcity: The New Science of Having Less and How It Defines Our Lives (Picador, 2013), talks to Metropolis’s Avinash Rajagopal about what lessons behavioral economics may hold for architecture and design.

Avinash Rajagopal: In the book you make the distinction between the perception of scarcity and the reality of it. Why is that difference important?

Eldar Shafir: First of all, the objective definition of scarcity is quite complicated. Obviously, what makes for scarcity in New York is very different than what makes for scarcity in New Delhi. In that sense, the issue becomes complicated.

The other thing is that if you look at things like the poverty line, or other definitions of that sort, they just might miss what makes people feel poor or not. A lot of the ways we count the poor, for example, is based on some number, but that number may not be, psychologically, the right measure. In some sense, if you are a behavioral scientist, what matters to you is the way people see the world, not the way you define it.

You say that scarcity, in almost every form, creates some very similar mind-sets. When we think about some of the larger societal resources, like crude oil or water or energy, are we making scarcity-based decisions that we may not be aware of?

The impact of scarcity is on the person who feels it. There could be scarce resources I have never thought about at all, and obviously those have no impact on my mind-set whatsoever. It’s very likely that for some small segment of society who is taking this seriously enough, their mind-set might actually be impacted by the feeling that we don’t have enough electricity or water, and they are very worried about it.

But certainly, I don’t think that describes the majority of Americans or people in the world. It doesn’t become part of their daily mind-set. Behaviorally, it’s quite different. That leads to its own issues, of course, because of a form of discounting, of what we call tunneling—when you’re very busy with managing your scarcity right now, you have much less mind left for worrying about things in the future or in the distance or in the periphery.

In that sense, there’s no doubt that with scarce resources society basically discounts the future. We can talk about infrastructure, for example. There are ways in which you can argue that society is focusing, tunneling very heavily, on what matters most right now—like security, security in airports, for example, whatever it is you care about the most. Bridges don’t get fixed, highways don’t get renovated, because we’re worried about safety and security and the election. So there’s some similar patterns at that societal level—you worry about what matters most to people now, and you neglect the rest.

Does giving people more information help them deal with scarcity? Designers, for example, have experimented with dashboards that help people make better decisions around energy use. From your behavioral economics perspective, does that help?

The same information presented in different ways, in different formats, at different moments of time, in different relation to others, can have a big impact. It’s a subtle story. Ideas42, the social science R&D lab I cofounded, does a lot of work trying to explore how best to present people with the things that will allow them to make the correct decisions. Opower is one electric-energy provider in California which has seriously taken these behavioral insights and explored them and tested them and looked at what kind of information provision leads people to better behaviors. What they found is that, basically, presenting to you how much energy you use relative to your neighbors, doing it in a way that makes it look like you could do better, is very effective.

This has also been valid in getting out the votes, by telling you that I’m going to send a map later showing which houses in your neighborhood voted and which didn’t, which—contrary to who you voted for, whether you voted or not—is publicly available information. That map gets them to go out and vote because it’s the comparison to others that gets them nervous. Many people have explored how best to present information in a way that’s motivating people.

How can we make certain types of scarcity more visible? And how can we leverage the positive effects of scarcity mind-sets?

A lot of the work in behavioral design policy looks at the fact that people function as, basically, semiautomatic pilots. We don’t think about everything we do; we just kind of go in and do it. There’s a lot of work, for example, on mindless eating, where I don’t stop and count calories and think, “Do I need three more french fries, or do I really need this extra quarter of chicken?” People just eat what is on their plate. There’s enormous data on how plates have gotten bigger over the years, and people just get served much more food now than they used to.

What that means is that if you design carefully, then you don’t need people to think about [their actions]. They will just eat healthy because it’s the concept of your design. In some sense of it, the people in your world who are in the business of designing contexts have enormous power. Escalators, rooms, temperatures—there are all sorts of things that can lead me to do better without thinking about it, without even being aware that anything is going on.

I think in the housing crisis and the schooling crisis, interestingly, designers and policy makers had a lot of initial impact. When you decide that schools get funded by real estate tax, by housing, you have immediately announced that poor neighborhoods will have poor schools. That’s a very clear design issue. Some of this is done intentionally, some isn’t, but the same planners and designers have a lot of access to instruments that could change the situation. For example, it’s very clear that designers ought to not create food deserts. They ought to not create situations where people live in a place where it takes a very long time to reach a fresh piece of fruit or a vegetable. That’s terrible neighborhood design.

One of the basic ideas that comes through in your book is that scarcity affects the poor differently and that they have certain unique ways of dealing with it.

A lot of work in marketing and other areas shows that the poor become experts in knowing which place sells the slightly cheaper produce, which packages give you more per unit item. They become experts in management of their funds. That requires a lot of attention.

When you attend to all those things—because we have very limited cognitive resources—it just leaves you with less attention to devote to other things. As a result of that, people who juggle their financial resources heavily and spend a lot of time becoming experts on the exact differential costs of things are attending less to other things in their lives.

That’s the second feature of scarcity for the poor, which is that while you’re becoming very expert and very attentive to the things that you’re trying to manage, other things get less attention, sometimes with unwanted repercussions. You might have less time to spend on eating healthy or on attending to your kid’s homework. Paradoxically, when you do that, sometimes you forget things that are very close to what you’re struggling with. As you’re counting the expenses and the prices, you might actually forget to pay something on time and get hit with an overdraft. Those are cases where juggling a lot ends up costing you, dearly in some cases.

The reality of many upper- and middle-class lives around the world, and certainly in the United States, is that we have too much stuff. You talk a little bit about this state of abundance as well in the book. How does that affect our decision-making process?

We studied abundance a lot less, but in general what abundance does, to some extent, is sort of the opposite of scarcity. It unfocuses you. Instead of being very efficient with a deadline tomorrow, now you have a month. You’re just going to let it go and not worry about it.

One thing that characterizes the rich is the number of choices they make that they need not worry about. In that sense, abundance allows you not to worry about things and be neglectful and sometimes wasteful.

Either you have just enough and you have to be very careful about how you use every dollar or you have a lot of extra, a lot of slack lying around. That slack allows you to live a much more comfortable life. You can take care of unexpected expenses or time commitments you didn’t realize you had before. You can afford to make mistakes because the slack pays for them. As you have less and less slack, you have to be much more careful of how you use every dollar, every moment of the day, and that requires a lot of attention, and it makes you pay a lot more dearly when unexpected things happen.

The ideas of too much and too little feel like two sides of the same coin. Steve Howard, the head of sustainability at Ikea, gave a speech earlier this year saying that we might have reached peak home furnishings, we’ve possibly produced enough furniture for everybody at this point, and that we should really be winding down furniture production. What are your thoughts on overproduction and overconsumption as the flip side of some people not having enough and living in scarcity?

That sounds right to me. The whole free market is based on people producing and people buying, and it’s not based on what’s needed the most. Clearly the ones with money are the ones who need the least, and they’re the ones who everybody is trying to entice to buy stuff. There’s no doubt that more and more we’re all about our changing our telephones and our cars every 20 minutes, while others don’t have enough to live on or eat.

Markets work very well in some ways, but are extremely insensitive to other things. Where they put their efforts and their attention is not always where we need it.

If you think about the average American today, everything around us is built so as to make us spend money, and every- thing is built in ways that make it very hard to save money. If you need to save, it’s quite hard. If you need to spend, it’s very easy. That creates [difficult] situations. There’s no doubt.

We’re accumulating a lot, a lot, a lot of stuff. It makes people very happy to buy it. It’s kind of fun to buy things. Very often we mispredict how long it’s going to give us pleasure,but all that is clearly impervious to the needs of those who have so, so, so much less.

Are there some new ideas that you’re thinking of right now that you can talk to us about?

Ideas42 has turned a couple of them into implementations where we try to design contexts that facilitate the everyday juggling of the poor just to see what impact that has on their lives. Those are long-term projects, so I’m thinking [it will be] three years before we know anything, but there’s an attempt to explore that. These days, I’m quite interested in the ability of the poor, for example, to sort of, to do “mind wandering,” to kind of think of other things and take a mental vacation from everyday struggles.

That sounds beautiful. Are there any other ways in which you feel your work directly connects to architecture and design?

One issue we touched upon, which I think is really critical, is this idea of being easily able to influence behaviors in ways that are very important. For people who don’t know [how to better their lives], don’t think about it, or are busy doing other things, there’s a lot you could do to improve and facilitate what they do in ways that are useful. That is certainly true in behavioral economics and in design.

The other one is, if you remember in the book, we talk a bit about this sort of empathy bridge. The idea is that if we’re able to describe to you what it’s like to be super busy, maybe you’ll understand a little better what it’s like to be super poor. I think this empathy issue is really critical for when we think about policy, including neighborhood design—for you to perceive the other as not as exotic and bizarre and less good, but somebody who easily could have been you and vice versa, given a di erent situation. Our policies toward the poor, toward criminals, toward all kinds of people, are extremely nonempathetic. It’s very easy for us to erect enormous boundaries and distinctions based on our under- standing, which creates lots of trouble in everything, from neighborhood safety to sharing our ideas and everything else.

Categories: Ideas, Sustainability