This reviewer wondered whether Scarcity should be a movie sequel to Scarface, except that Tony Montana was killed off in the original. Hence it is behavioural economics instead. She also wondered whether it was really a whole book in itself, rather than what could have been a chapter out of any number of other texts in the genre. In other words, there is a slight exercise in manufacturing abundance, she suspects. And why not.
The authors are impressively-credentialled Harvard economics and Princeton psychology professors respectively, relatively new on the scene (well, a decade or two) yet making waves. So somewhat ambitiously they open and close this 2013 book with the descriptor "a science in the making"; or at least, perhaps more modestly, they invite the reader to consider that this might be the case. This probably overplays the richness of the seam of enquiry they have hit on, but it’s good nonetheless.
Scarcity is not enough stuff. Or more relevant, it’s less than the amount of something that would make the something valueless. What the authors are interested in is how this influences human behaviour, starting with the obvious then going beyond, and coining some terms for what they identify, that will (this reviewer presumes) stamp their trademark on future propagation of their ideas. Not many of the effects of scarcity are good—in fact there seems to be only one, which is got out of the way in the first chapter: not enough time, money, something else, yields a focus dividend. And this is not just about being more careful with that one has--it captures the mind so that one can do something in the presence of scarcity that one could not do otherwise. The example is a celebrity chef creating her best, and later flagship menu item, for a game show under pressure; there are probably more down-to-earth examples.
But beyond this, scarcity invokes tunnelling—the blocking out of other things to focus on the scarce one. This doesn’t help if—for example—you are a firefighter speeding to a blaze and you neglect to use a seat belt (another example). The other major inhibitor is what the authors call bandwidth tax—which is the insidiousness of scarcity-of-resource inviting (mostly) excess worry about itself such that it is self-reinforcing. As such the bandwidth tax stymies internally and externally applied efforts to compensate for scarcity, so that people do not correct themselves, and do not get corrected, from the mistakes they make. Both cognitive capacity and executive control are taxed—there become less of them—so vicious spirals result. Income-poor farmers don’t insure their harvest, though they have more of a need to do so (the downside is more serious for them). On the far side of the focus dividend, performers choke under pressure. Dieters crumble because self-enforced calorie scarcity magnifies focus on the very thing the dieter is trying to avoid. Lonely folk create below-average profiles on dating sites.
At this point the emphasis shifts to consideration of poverty, which it never really leaves thereafter. The incentive to make better financial choices (less wasteful ones) is higher under income scarcity, but the incidence of bad choices is paradoxically higher too. Scarcity apparently overturns the tenets of homo-economicus. Via behavioural experiments and real-life vignettes, the authors work up to the backbone of their thesis which is that this is not caused by fecklessness (the idea that the experience of scarcity is caused by character deficiency), but is caused by the scarcity trap itself. And they single out poverty because it is the least self-imposed and the least temporary type of scarcity. Harder to forget, and therefore harder to evade this bandwidth tax. Their explanation for "why the poor fail so badly and in so many ways" is that it is the scarcity mindset that causes failure, a reversal of the notion that failure is the cause of scarcity. Such a conclusion would have struck this reviewer as little more than polished political correctness, were she not to acknowledge and give credit for Mullainathan and Shafir’s meticulous stripping away of embedded biases in the design of their study-experiments and from their data. Shortage of cash may not exactly help success. Shortage of bandwidth created by the former compounds that. Yikes.
This leads to the final section, about remedies, or designing for scarcity as the authors call it. Changing the design of levers on a flight deck so that wheels-up is not next to the same control for the wing flaps (and does not feel the same!), was a breakthrough in cutting after-landing crashes of US military planes in WW2. With this cool intro, the reader is invited to consider similar design improvements in dealing with poverty—that is—improvements in the effectiveness of handling human error. Examples are such as increased ease of getting back on track with training/study programs provided via welfare, so that missing one module does not launch onto a trajectory that is progressively harder to recover from. Or more flexible pay dates provided by employers that would obviate much of a need for pay-day lending. Or smaller but more frequently renewable caps on various entitlement programs. Not many of the ideas stuck this reviewer as brilliant, but the concept seemed solid to her—that there is an under-supplied need to enable the poor to be insured against small shocks (lower amplitude, higher frequency), so that bandwidth can be increased (slack can be created) when it matters. Because the inevitability of many small shocks is not going to be a surprise—rather, it is highly predictable, and because the deadweight loss of persistent bandwidth tax is—if one buys the thesis—now known about in advance. Some of this is reminiscent of the wish for Kenneth Arrow’s complete set of hedging markets. Or more of them than there are, anyway.
The design idea is extended to organizations. We undervalue slack and do not appreciate the paradoxical way in which creating it can actually leverage efficiency: variable (lower) speed limits on highways can actually reduce journey times as larger spaces between vehicles afford greater allowance for small disturbances, a busy hospital’s decision to hold one operating theatre mostly vacant for unplanned procedures eliminated a lot of inefficient shuffling that had been required when these had to be squashed in anywhere, Henry Ford reduced weekly work hours and gained higher (more productive) output from workers. The last chapter has suggestions whereby you the reader can enable this sort of thing too. (Of course, it is too late for Tony Montana)
Pretty good, entertaining and readable a couple of times over. If any of the above sounds like "Nudge" or "Thinking Fast and Slow", then the presence of endorsement quotes from Kahneman and Thaler on the back cover shouldn’t come as a surprise to the reader.
The authors are impressively-credentialled Harvard economics and Princeton psychology professors respectively, relatively new on the scene (well, a decade or two) yet making waves. So somewhat ambitiously they open and close this 2013 book with the descriptor "a science in the making"; or at least, perhaps more modestly, they invite the reader to consider that this might be the case. This probably overplays the richness of the seam of enquiry they have hit on, but it’s good nonetheless.
Scarcity is not enough stuff. Or more relevant, it’s less than the amount of something that would make the something valueless. What the authors are interested in is how this influences human behaviour, starting with the obvious then going beyond, and coining some terms for what they identify, that will (this reviewer presumes) stamp their trademark on future propagation of their ideas. Not many of the effects of scarcity are good—in fact there seems to be only one, which is got out of the way in the first chapter: not enough time, money, something else, yields a focus dividend. And this is not just about being more careful with that one has--it captures the mind so that one can do something in the presence of scarcity that one could not do otherwise. The example is a celebrity chef creating her best, and later flagship menu item, for a game show under pressure; there are probably more down-to-earth examples.
But beyond this, scarcity invokes tunnelling—the blocking out of other things to focus on the scarce one. This doesn’t help if—for example—you are a firefighter speeding to a blaze and you neglect to use a seat belt (another example). The other major inhibitor is what the authors call bandwidth tax—which is the insidiousness of scarcity-of-resource inviting (mostly) excess worry about itself such that it is self-reinforcing. As such the bandwidth tax stymies internally and externally applied efforts to compensate for scarcity, so that people do not correct themselves, and do not get corrected, from the mistakes they make. Both cognitive capacity and executive control are taxed—there become less of them—so vicious spirals result. Income-poor farmers don’t insure their harvest, though they have more of a need to do so (the downside is more serious for them). On the far side of the focus dividend, performers choke under pressure. Dieters crumble because self-enforced calorie scarcity magnifies focus on the very thing the dieter is trying to avoid. Lonely folk create below-average profiles on dating sites.
At this point the emphasis shifts to consideration of poverty, which it never really leaves thereafter. The incentive to make better financial choices (less wasteful ones) is higher under income scarcity, but the incidence of bad choices is paradoxically higher too. Scarcity apparently overturns the tenets of homo-economicus. Via behavioural experiments and real-life vignettes, the authors work up to the backbone of their thesis which is that this is not caused by fecklessness (the idea that the experience of scarcity is caused by character deficiency), but is caused by the scarcity trap itself. And they single out poverty because it is the least self-imposed and the least temporary type of scarcity. Harder to forget, and therefore harder to evade this bandwidth tax. Their explanation for "why the poor fail so badly and in so many ways" is that it is the scarcity mindset that causes failure, a reversal of the notion that failure is the cause of scarcity. Such a conclusion would have struck this reviewer as little more than polished political correctness, were she not to acknowledge and give credit for Mullainathan and Shafir’s meticulous stripping away of embedded biases in the design of their study-experiments and from their data. Shortage of cash may not exactly help success. Shortage of bandwidth created by the former compounds that. Yikes.
This leads to the final section, about remedies, or designing for scarcity as the authors call it. Changing the design of levers on a flight deck so that wheels-up is not next to the same control for the wing flaps (and does not feel the same!), was a breakthrough in cutting after-landing crashes of US military planes in WW2. With this cool intro, the reader is invited to consider similar design improvements in dealing with poverty—that is—improvements in the effectiveness of handling human error. Examples are such as increased ease of getting back on track with training/study programs provided via welfare, so that missing one module does not launch onto a trajectory that is progressively harder to recover from. Or more flexible pay dates provided by employers that would obviate much of a need for pay-day lending. Or smaller but more frequently renewable caps on various entitlement programs. Not many of the ideas stuck this reviewer as brilliant, but the concept seemed solid to her—that there is an under-supplied need to enable the poor to be insured against small shocks (lower amplitude, higher frequency), so that bandwidth can be increased (slack can be created) when it matters. Because the inevitability of many small shocks is not going to be a surprise—rather, it is highly predictable, and because the deadweight loss of persistent bandwidth tax is—if one buys the thesis—now known about in advance. Some of this is reminiscent of the wish for Kenneth Arrow’s complete set of hedging markets. Or more of them than there are, anyway.
The design idea is extended to organizations. We undervalue slack and do not appreciate the paradoxical way in which creating it can actually leverage efficiency: variable (lower) speed limits on highways can actually reduce journey times as larger spaces between vehicles afford greater allowance for small disturbances, a busy hospital’s decision to hold one operating theatre mostly vacant for unplanned procedures eliminated a lot of inefficient shuffling that had been required when these had to be squashed in anywhere, Henry Ford reduced weekly work hours and gained higher (more productive) output from workers. The last chapter has suggestions whereby you the reader can enable this sort of thing too. (Of course, it is too late for Tony Montana)
Pretty good, entertaining and readable a couple of times over. If any of the above sounds like "Nudge" or "Thinking Fast and Slow", then the presence of endorsement quotes from Kahneman and Thaler on the back cover shouldn’t come as a surprise to the reader.
via JREF Forum http://ift.tt/1oS6aAo
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