Scarcity: Why Having Too Little Means So Much (30 page)

74   
“don’t have to; [they] make enough money”
:
K. Van Ittersum, J. Pennings, and B. Wansink, “Trying Harder and Doing Worse: How Grocery Shoppers Track In-Store Spending,”
Journal of Marketing
(2010), retrieved from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1546461
.

74   
A Dutch study
:
G. Antonides, I. Manon de Groot, and W. Fred van Raaij, “Mental Budgeting and the Management of Household Finance,”
Journal of Economic Psychology
32, no. 4 (2011): 546–55. doi:10.1016/j.joep.2011.04.001.

74   
leaving 10 percent aside as “fun money”
:
Simpler saving: “The 60% Solution,”
MSNMoney
, retrieved October 24, 2012, from
http://money.msn.com/how-to-budget/a-simpler-way-to-save-the-60-percent-solution-jenkins.aspx?page=0
.

75   
This mindset is a feature of abundance
:
For an alternative treatment of anticipated time slack, see G. Zauberman and J. G. Lynch, “Resource Slack and Propensity to Discount Delayed Investments of Time Versus Money,”
Journal of Experimental Psychology: General
134, no. 1 (2005): 23–37.

75   
No man-made structure
:
J. M. Graham,
The Hive and the Honey Bee
(Hamilton, Ill.: Dadant & Sons, 1992).

75   
a 10 percent tolerance
:
The reader fascinated by plywood tolerances can dig into various plywood tolerances in
Plywood Standards
, Voluntary Product Standard PS 1-09, National Institute of Standards and Technology, U.S. Department of Commerce, available at
http://gsi.nist.gov/global/docs/vps/PS-1-09.pdf
.

75   
mud dauber wasps are also nest builders
:
H. J. Brockmann, “Diversity in the Nesting Behavior of Mud-Daubers (Trypoxylon
politum Say; Sphecidae),”
Florida Entomologist
63, no. 1 (1980): 53–64.

77   
When the rich take a pause
:
This rationale for slack is reminiscent of Herbert Simon’s argument that people do not maximize: they satisfice, doing well enough to get by. See Herbert A. Simon, “Rational Choice and the Structure of the Environment,”
Psychological Review
63, no. 2 (1956): 129. In his view people lacked the cognitive resources to optimize. If we were to use his language, we would say that scarcity allows less satisfing behavior. While this captures some elements of slack, the impact of scarcity is more automatic and less controllable than this description implies. As we will see, the uncontrollability plays a central role in understanding scarcity.

77   
A house is just a pile of stuff
:
George Carlin,
Brain Droppings
(New York: Hyperion, 1997), 37.

77   
cabinet castaways
:
A terrific discussion of cabinet castaways can be found in Brian Wansink, S. Adam Brasel, and Stephen Amjad, “The Mystery of the Cabinet Castaway: Why We Buy Products We Never Use,”
Journal of Family and Consumer Science
92, no. 1 (2000): 104–8. One reason we end up with so many castaways is what economists might call “option value.” When we buy we do not know if we will use the item but value the option of having it around just in case. The psychology can be more complex than this simple narrative. Under scarcity, we would argue, one would think more carefully—indeed, focus—on the odds of eventual use, carefully evaluating the option value, rather than opting for the nonchalant “just in case” scenario.

77   
over $12 billion is spent annually on self-storage
:
SSA | 2012 SSA Fact Sheet
, retrieved from
http://www.selfstorage.org/ssa/Content/NavigationMenu/ AboutSSA/FactSheet/default.htm
.

77   
“every American could stand”
:
Ibid.

78   
“Human laziness has always been a big friend”
:
J. Mooallem, “The Self-Storage Self,”
New York Times
, September 6, 2009, retrieved from
http://www.nytimes.com/2009/09/06/magazine/06self-storage-t.html
.

79   
hypothetical decision we presented to a group of university students
:
D. A. Redelmeier and E. Shafir, “Medical Decision Making in Situations That Offer Multiple Alternatives,”
JAMA—Journal of the American Medical Association
273, no. 4 (1995): 302–5.

80   
free
not
to choose
:
M. Friedman and R. Friedman,
Free to Choose: A Personal Statement
(Orlando, Fla.: Mariner Books, 1990).

81   
estimate the time required to finish their senior theses
:
R. Buehler, D. Griffin, and M. Ross, “Exploring the ‘Planning Fallacy’: Why People Underestimate Their Task Completion Times,”
Journal of Personality and Social Psychology
67, no. 3 (1994): 366.

81   
end up in “time trouble”
:
M. Sigman, “Response Time Distributions in Rapid Chess: A Large-Scale Decision-Making Experiment,”
Frontiers in Neuroscience
4 (2010). doi:10.3389/fnins.2010.00060.

82   
the
temptation tax
is regressive
:
A. Banerjee and S. Mullainathan,
The Shape of Temptation: Implications for the Economic Lives of the Poor
(Working Paper No. w15973, National Bureau of Economic Research, 2010).

83   
Psychological biases often persist despite more extreme consequences
:
People will behave differently if the stakes are high, was an early argument against the relevance of psychological findings for social phenomena. In the last two decades, research has shown that people’s psychological biases affect decisions as consequential as their retirement or their health and mortality.

85   
needing to navigate a world that is computationally more complex
:
The notion of computational complexity here can be understood by contrasting linear programming to integer programming. In linear programming, items can be infinitely subdivided—the logical extension of granularity. In integer programming, items must be packed in fixed units—the logical extension of bulkiness. Computer scientists have shown in a precise mathematical sense that integer programming is inherently harder than linear programming. A detailed introduction to these ideas can be found in Alexander Schrijver,
Theory of Linear and Integer Programming
(West Sussex, England: John Wiley & Sons, 1998).

86   
As Henry David Thoreau observed
:
Thoreau himself took a different lesson from this observation. He advocated not for increasing your wealth but for moderating your desires. In our language, there are two ways to get slack. Either you get a bigger suitcase or you reduce the number of things you wish to pack into it.

86   
“A man is rich in proportion”
:
Henry David Thoreau,
Walden
(Yale University Press, 2006), 87.

87   
40 rupees (80 cents)
:
In this book we will simply use the nominal exchange rates to describe the value of foreign currency (rupees in this case) in dollars. This is perfectly valid for some uses, such as how much Alex should value the rupees. But in some cases this can be misleading because exchange rates do not account for price differences between countries. For example, a rupee goes further in India because many things are also cheaper there. In trying to assess income differences across countries, most economists adjust not only for exchange rates but also for
purchasing power parity
—a measure of price differences. Since this book is not intended to be a careful cross-country comparison of incomes, for ease of reading we simply use nominal exchange rates. But the reader should keep this distinction in mind.

89   
Imagine you have spent the day shopping
:
This is a slightly updated (for inflation) version of Tversky and Kahneman’s famous “jacket-calculator” problem; A. Tversky and D. Kahneman, “The Framing of Decisions and the Psychology of Choice,”
Science
211, no. 4481 (1981): 453–58. See also R. Thaler, “Mental Accounting Matters,”
Journal of Behavioral Decision Making
12 (1999): 183–206.

89   
one can change the value of an hour
:
Ofer H. Azar, “Relative Thinking Theory,”
The Journal of Socio-Economics
36, no. 1 (2007): 1–14.

90   
college students, MBAs, professional gamblers, and executives of all stripes
:
Some studies have found similar effects using incentives. In one study, people were asked to solve algebra questions and were paid 6¢ for each correct answer. Some were given a base show-up fee of $1, some $3, and some $10. The 6¢ per correct answer looked big for the $1 group and small for the $10 group. And indeed the $1 group worked harder and answered more questions when their reward for their effort “looked larger.” Some researchers with a sense of humor went to the 2003 North American Summer Meetings of the Econometric Society and obtained similar data with professional economists. Turns out that economists are no more skilled at rational decision making than the rest of us.

90   
a version of the laptop/DVD question
:
The proportions of those advising to opt for the savings in the $100 and $1,000 conditions differed significantly for the high-income participants (Princeton Junction) but not for the low-income participants (Trenton); this study had N = 123. C. C. Hall,
Decisions Under Poverty: A Behavioral Perspective on the Decision Making of the Poor
(PhD diss., Princeton University, 2008).

91   
The slight increase may be due to the feeling
:
It is unlikely that these results are not merely due to “ceiling” effects, by there being less room for the poor to increase their willingness to go. While they are higher than for the well off, they are still well below 100 percent in their willingness to travel.

92   
a blindfolded subject held in one hand
:
H. E. Ross, “Weber Then and Now,”
Perception
24, no. 6 (1995): 599.

92   
people use more detergent when the cap is larger
:
G. Trotta, “Some Laundry-Detergent Caps Can Lead to Overdosing,” June 5, 2009, retrieved from
http://news.consumerreports.org/home/2009/06/laundry-detergent-overdosing-caps-procter-and-gamble-method-sun-era-tide-cheer-all-consumer-reports-.html
.

93   
to replicate intervals of six, twelve, eighteen, and twenty-four seconds
:
S. Grondin and P. R. Killeen, “Tracking Time with Song and Count: Different Weber Functions for Musicians and Nonmusicians,”
Attention, Perception, and Psychophysics
71, no. 7 (2009): 1649–54.

93   
less likely to be affected by bottle height
:
B. Wansink and K. Van Ittersum, “Bottoms Up! The Influence of Elongation on Pouring and Consumption Volume,”
Journal of Consumer Research
30, no. 3 (2003): 455–63.

93   
shoppers exiting a supermarket
:
I. M. Rosa-Díaz, “Price Knowledge: Effects of Consumers’ Attitudes Towards Prices, Demographics, and Socio-cultural Characteristics,”
Journal of Product and Brand Management
13, no. 6 (2004): 406–28. doi:10.1108/10610420410560307.

93   
commuters in Boston
:
The difference in proportion of correct answers between the high- and low-income respondents was statistically significant, p < .05, N = 104.

94   
rich and poor smokers respond
:
Jacob Goldin and Tatiana Homonoff, “Smoke Gets in Your Eyes: Cigarette Tax Salience and
Regressivity,”
American Economic Journal: Economic Policy
5, no. 1 (February 2013): 302–36.

94   
they are better at deciphering that the total price
:
If all this paints a picture of the poor giving more attention because the stakes are higher, that is part of the point. The interesting implication here, though, is how this greater attentiveness changes the decision process, how it changes the “biases” that have been documented for a broad class of people.

94   
25 percent of brands
:
J. K. Binkley and J. Bejnarowicz, “Consumer Price Awareness in Food Shopping: The Case of Quantity Surcharges,”
Journal of Retailing
79, no. 1 (2003): 27–35. doi: 10.1016/S0022-4359(03)00005-8.

94   
“sneaky consumer product trick”
:
“Sold Short? Are You Getting Less Than You Think? Let Us Count the Ways,” (
Consumer Reports
) February 2000, 24–26.

94   
supermarkets in low-income neighborhoods
:
Ibid.

96   
“You would say, ‘I like vacations in the Bahamas’ ”
:
Dan Ariely articulates the challenge of trade-off thinking here:
http://bigthink.com/ideas/17458
.

98   
purchased a cognac truffle for $3
:
Shane Frederick, Nathan Novemsky, Jing Wang, Ravi Dhar, and Stephen Nowlis, “Opportunity Cost of Neglect,”
Journal of Consumer Research
36, no. 4 (2009): 553–61.

99   
The checker-shadow illusion
:
There is a large array of demonstrations of the context dependence of perception. Ted Adelson’s checker-shadow illusion is one of our favorites. It is reproduced with permission. To experience this and other such illusions you can go to
http://web.mit.edu/persci/people/adelson/checker-shadow_illusion.html
. For a more detailed discussion of the cognitive mechanisms underlying illusions such as these, see Edward H. Adelson, “Lightness Perception and Lightness Illusions,”
The New Cognitive Neurosciences
(1999): 339.

100
Imagine you are lying on the beach on a hot day
:
This is based on Richard Thaler, “Mental Accounting and Consumer Choice,”
Marketing Science
4, no. 3 (1985): 199–214. Data collected with Anuj Shah in 2012. The well off showed a significant difference between frames, whereas the poor did not; p < .01 (N = 148).