Scarcity: Why Having Too Little Means So Much (31 page)

101
when gasoline prices go up
:
J. Hastings and J. M. Shapiro,
Mental
Accounting and Consumer Choice: Evidence from Commodity Price Shocks
(Cambridge, Mass.: National Bureau of Economic Research, Working Paper No. 18248, 2012).

101
The poor should be less prone to show this effect
:
Data collected with Anuj Shah in 2012 support this prediction. We presented participants with versions of the tax-rebate versus the stock value scenarios. The well off showed a different proneness to spend under the two frames, whereas the poor did not; p < .05 (N = 141).

102
You purchase a small season ticket package
:
Data collected with Anuj Shah in 2012. The rich were more likely to choose the historical cost and the poor the replacement cost; p < .05 in both cases (N = 98).

102
$0 because the ticket is already paid for
:
E. Shafir and R. H. Thaler, “Invest Now, Drink Later, Spend Never: On the Mental Accounting of Delayed Consumption,”
Journal of Economic Psychology
27 (2006): 694–712.

103
Paul Ferraro and Laura Taylor
:
Paul J. Ferraro and Laura O. Taylor, “Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance from the Dismal Science” (2005).

103
“I have a hard time believing that this is possible”
:
This is from the blog
Marginal Revolution
.
http://marginalrevolution.com/marginalrevolution/2005/09/ opportunity_cos.html
.

105
There is nothing in the prospect
:
J. A. Riis,
How the Other Half Lives
(Boston, Mass.: Bedford/St. Martin’s, 2010).

105
Once a student in the Head Start child development program
:
The Center for Responsible Lending’s description of Sandra Harris’s story can be found here:
http://www.responsiblelending.org/payday-lending/tools-resources/victims-2.html
.

107
more than 23,000 payday lender branches
:
M. Fellowes and M. Mabanta,
Banking on Wealth: America’s New Retail Banking Infrastructure and Its Wealth-Building Potential
(Washington, D.C.: Brookings Institution, 2008).

107
more than all the McDonald’s
:
McDonald’s restaurants statistics—countries compared—NationMaster, retrieved from
http://www.nationmaster.com/graph/foo_mcd_res-food-mcdonalds-restaurants
.

107
and Starbucks
:
Loxcel Starbucks Store Map FAQ, retrieved from
http://loxcel.com/sbux-faq.html
.

107
$3.5 billion in fees each year
:
Fast Facts, retrieved October 24, 2012, from
http://www.responsiblelending.org/payday-lending/tools-resources/fast-facts.html
. Repeat business is so common in this industry that 98 percent of loan volume goes to repeat borrowers.

107
18 percent of the poorest families
:
A wonderful discussion of these issues can be found in Michael Barr,
No Slack
(Washington, D.C.: Brookings Institution Press, 2002).

107
nearly 5 percent of the annual income of the poor
:
K. Edin and L. Lein,
Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work
(New York: Russell Sage Foundation Publications, 1997). For a captivating update on the economic lives of the American poor, see Sarah Halpern-Meekin, Kathryn Edin, Laura Tach, and Jennifer Sykes,
It’s Not Like I’m Poor: How Working Families Make Ends Meet in a Post-Welfare World
(Berkeley: University of California Press, forthcoming).

108
informal moneylenders who charge rates every bit as extreme
:
See Abhijit Banerjee, “Contracting Constraints, Credit Markets, and Economic Development,” in
Advances in Economics and Econometrics: Theory and Application,
Eighth World Congress of the Econometric Society, vol. 3, ed. Mathias Dewatripont, Lars Hansen, and S. Turnovsky (Cambridge: Cambridge University Press, 2004), 1–46.

110
loans are particularly attractive
:
The other common reason cited for excessive borrowing is myopia of some form. What is interesting in this narrative is that myopia here—tunneling—is not a generalized personal trait. Everyone tunnels when faced with scarcity. And recall that the same force that generates tunneling also generates the focus dividend. Unlike myopia, tunneling has positive consequences as well.

112
Princeton undergraduates to play
Family Feud
in a controlled setting
:
These studies can be found in Anuj Shah, Sendhil Mullainathan, and Eldar Shafir, “Some Consequences of Having Too Little,”
Science
338 (2013): 682–85.

114
present bias
:
A nice overview of present bias and other models of time discounting can be found in Shane Frederick and George Loewenstein, “Time Discounting and Time Preference: A Critical Review,”
Journal of Economic Literature
(2002).

115
Because machine uptime was important
:
R. E. Bohn and R. Jaikumar,
Firefighting by Knowledge Workers
(Information Storage Industry Center, Graduate School of International Relations and Pacific Studies, University of California, 2000), retrieved from
http://isic.ucsd.edu/pdf/firefighting.pdf
.

117
Steven Covey finds it helpful to classify tasks
:
S. R. Covey,
The Seven Habits of Highly Effective People
(New York: Free Press, 2004).

119
approximately one in four rural bridges
:
Bridges—Report Card for America’s Infrastructure
, retrieved from
http://www.infra-structurereportcard.org/fact-sheet/bridges
.

119
scarcity makes this problem a whole lot worse
:
There are many studies of the planning fallacy. Good reviews are: Roger Buehler, Dale Griffin, and Michael Ross, “Inside the Planning Fallacy: The Causes and Consequences of Optimistic Time Predictions,” in
Heuristics and Biases: The Psychology of Intuitive Judgment
, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 250–70; D. Lovallo and D. Kahneman, “Delusions of Success,”
Harvard Business Review
(2003): 1–8. While there is no explicit study of the impact of scarcity, it follows naturally that the planning fallacy would prove more pronounced among those who are especially tunneling, as occurs under scarcity.

123
Everywhere is walking distance
:
Quote from Steven Wright. In W. Way,
Oxymorons and Other Contradictions
(Bloomington, Ind.: AuthorHouse, 2005).

123
A typical vendor buys about 1,000 rupees
:
These data draw from Dean Karlan and Sendhil Mullainathan, “Debt Traps” (working paper, 2012).

123
a little over $2
:
In this book when we report dollar equivalents, we simply convert using prevailing exchange rates. Yet many experts feel this can paint a misleading impression because people in different countries also face different prices. So the vendor, for example, will also have lower prices for food and other items. As a result, her income in nominal dollar terms does not adequately
reflect her purchasing power. Economists have suggested using purchasing power parity instead of nominal exchange rates. In the case of India, this would result in an income that is roughly 2.5 times higher for the vendor.

126
An initial scarcity is compounded by behaviors that magnify it
:
Economists and especially development economists have focused on what they call
poverty traps
—the notion that those who begin poor will stay poor. A commonly discussed mechanism is a lucrative investment opportunity that requires a fixed amount of capital. The rich have enough capital to make the investment while the poor will find it hard to save up enough money to do so. Other mechanisms discussed include aspirations and myopia. Relevant references can be found in Debraj Ray, “Development Economics,”
The New Palgrave Dictionary of Economics,
ed. Lawrence Blume and Steven Durlauf (2007).

127
jewel loans at 13 percent annual interest
:
This work can be found in Michael Faye and Sendhil Mullainathan, “Demand and Use of Credit in Rural India: An Experimental Analysis” (working paper, Harvard University, 2008).

129
about ten distinct financial instruments on average
:
Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven,
Portfolios of the Poor: How the World’s Poor Live on $2 a Day
(Princeton, N.J.: Princeton University Press, 2010).

129
they work very few hours those days
:
Though time use data in developing countries can be hard to come by, a very nice set of studies is found in Quentin Wodon and Mark Blackden,
Gender, Time Use, and Poverty in Sub-Saharan Africa
(Washington, D.C.: World Bank Press, 2006).

132
little evidence to show that willpower capacity increases with use
:
M. Muraven and R. F. Baumeister, “Self-Regulation and Depletion of Limited Resources: Does Self-Control Resemble a Muscle?”
Psychological Bulletin
126, no. 2 (2000): 247–59. doi:10.1037//0033-2909.126.2.247.

132
in a room with some highly tempting snacks
:
K. D. Vohs and T. F. Heatherton, “Self-Regulatory Failure: A Resource-Depletion Approach,”
Psychological Science
11, no. 3 (2000): 249–54.

136
not able to come by $2 every day
:
D. Collins et al.,
Portfolios of the Poor
.

136
[Automotive] repairs themselves are unexpected expenses
:
New Amsterdam Consulting, “Stability First Pilot Test: Pre-Test Interviews Narrative Report” (March 2012).

138
$2,000 in thirty days
:
A. Lusardi, D. J. Schneider, and P. Tufano,
Financially Fragile Households: Evidence and Implications
(National Bureau of Economic Research, 2011), retrieved from
http://www.nber.org/papers/w17072
.

140
the lonely overfocus
:
A nice description of many such experiments can be found in John T. Cacioppo and William Patrick,
Loneliness: Human Nature, and the Need for Social Connection
(New York: W. W. Norton, 2009).

141
2,750 free throws in a row
:
J. Friedman, “How Did Tom Amberry Set the World Free Throw Record?”
Sports Illustrated
, October 17, 1994, retrieved from
http://sportsillustrated.cnn.com/vault/article/magazine/MAG1005796/index.htm
.

141
only 40 percent of his free throws
:
Bruce Bowen,
Basketball-Reference.com
, retrieved October 31, 2012, from
http://www.basketball-reference.com/players/b/bowenbr01.html
.

142
they are
better
at doing them automatically
:
S. L. Beilock, A. R. McConnell et al., “Stereotype Threat and Sport: Can Athletic Performance Be Threatened?”
Journal of Sport and Exercise Psychology
26, no. 4 (2004): 597–609.

142
an inverted U-curve
:
R. M. Yerkes and J. D. Dodson, “The Relation of Strength of Stimulus to Rapidity of Habit-Formation,”
Journal of Comparative Neurology and Psychology
18, no. 5 (1908): 459–82.

143
an ironic process
:
Daniel M. Wegner, David J. Schneider, Samuel R. Carter, and Teri L. White, “Paradoxical Effects of Thought Suppression,”
Journal of Personality and Social Psychology
53, no. 1 (1987): 5–13; D. M. Wegner,
White Bears and Other Unwanted Thoughts: Suppression, Obsession, and the Psychology of Mental Control
(New York: Viking, 1989).

147
Before you criticize someone
:
J. Carr and L. Greeves,
Only Joking: What’s So Funny About Making People Laugh?
(New York: Gotham Books, 2006).

147
22,000 children die each day
:
Levels and Trends in Child Mortality
(Washington, D.C.: The UN Inter-Agency Group for Child Mortality Estimation [IGME], 2010).

147
Nearly one billion people are so illiterate
:
http://www.globalissues.org/article/26/poverty-facts-and-stats
.

147
Half the children in the world
:
The World Bank uses a poverty rate of $2.50 a day. This focuses on “absolute” poverty. By this measure, no U.S. children would be in poverty. These and other facts on global poverty can be found at Anup Shah, “Poverty Facts and Stats,”
Global Issues
26 (2008). For an incisive and insightful examination of poverty around the world, see Abhijit Banerjee and Esther Duflo,
Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty
(New York: PublicAffairs, 2011).

147
Nearly 50 percent of all children in the United States
:
see Mark R. Rank and Thomas A. Hirschl, “Estimating the Risk of Food Stamp Use and Impoverishment during Childhood,”
Archives of Pediatrics and Adolescent Medicine
163, no. 11 (2009): 994.

147
About 15 percent of American households
:
See Alisha Coleman-Jensen et al., “Household Food Security in the United States in 2010,”
USDA-ERS Economic Research Report
125 (2011).

148
carbon monoxide, a deadly pollutant
:
B. Ritz and F. Yu, “The Effect of Ambient Carbon Monoxide on Low Birth Weight Among Children Born in Southern California Between 1989 and 1993,”
Environmental Health Perspectives
107, no. 1 (1999): 17.