April 13, 2011
The Psychology of Scarcity
Eldar Shafir
Professor of Psychology and Public Affairs, Princeton University
Minutes of the 26th Meeting of the 69th Year
The presiding officer was Bob Varrin.
The invocation was led by Don Edwards.
Gerry Berkelhammer read the minutes of the April 6th 2011 meeting.
There were no guests.
The attendance was 82.
Ruth Miller introduced the speaker of the day, Eldar Shafir, Professor of Psychology and Public Affairs at Princeton University.
Professor Shafir’s research focuses on the examination of reasoning, judgment and decision-making in situations of conflict and uncertainty. Specifically, his current efforts focus on decision making in the context of poverty.
His topic was entitled “On the Psychology of Scarcity.”
In a mere 60 minutes Professor Shafir addressed some of life’s great imponderables, including:
Why it is that people who should or could know better have such bad judgment?
Why it is that we, who certainly do know better, are all wrong about them…i.e. why we just don’t get it?
And how unpacking “the packing problem” can help us make better decisions about such intransigent issues as poverty in America.
Professor Shafir began with a 2-minute review of behavioral psychology 101.
While we pondered this overview, he cleverly made the leap to how these psychological insights could lead us to a better understanding of “the problem of poverty.”
He concluded by unpacking the “the packing problem.”
He began with a classical example of seemingly reasonable people making terrible decisions. He described the “Milgram Obedience Studies” wherein “teachers” (i.e. unsuspecting middle-aged men from New Haven) punished “learners” (actually clever actors with scripts) for their wrong answers by administering an electric shock. The voltage increased with each incorrect answer from mild to severe. Students complained of pain, threat of heart attack but the authority ordered the teachers to continue. And continue they did.
The purpose of this exercise was to prove that although this terrible behavior could have gone on in the 1940’s in Germany, it could never happen in our democratic society.
Rational adults were asked to predict at which point the “teacher” would refuse to obey.
Everyone predicted disobedience at 135 volts, certainly not beyond 300 volts. Even a psychiatrist predicted only 1/1000 would go beyond 450 volts. They were, of course, all wrong, wrong, wrong.
Every participant obeyed up to 300 volts and 65% went to 450 volts!!
Why would people who should know better, behave so inhumanely?
Well, that‘s the part we (who know better) just don’t get.
More depressing is that had we been there, we would have done the very same thing.
The Lesson is simple: The power of the situation (the context) completely dominates any rational behavior.
While we pondered this insight, Professor Shafir cleverly made the leap to Poverty in America!
The facts are stunning.
43.6 million people were in poverty in 2009.
58.5% of American spend at least one year below the poverty line.
Half of US kids will get food stamps.
Poverty is a deeply social, psychological state
There are two dominant views of poverty.
It’s a rational choice: the poor understand their choices and make them rationally.
It’s a pathology: the poor do not understand their choices and need to be educated.
Or neither: the poor are like us, i.e. somewhat confused and doing the best we can.
Each view has policy implications for dealing with the issue of poverty.
The examples of decision making in stressful situations are legion and demonstrate dramatically the divide in low and high income earners. These examples help us understand why the poor are “unbanked” and why Indian vendors get into debt traps
The disadvantaged don’t look so good: they are more obese than we are, don’t take their medication, are harsher parents, have outstanding credit card balances and they don’t even farm well.
Why is this?
One view is that the evidence is flawed; another that the poor need to be taught. We could also reason that that’s why they’re poor or it’s because they’re poor. Take your choice.
How to understand this behavior? The Shafir approach to understanding poverty is to see it through the lens of “Scarcity.” Conditions of scarcity (money, time, friends) produce their own psychology with specific behaviors.
Thus we arrive at “ The Suitcase Metaphor.”
Slack suitcases are easy to pack, and therefore, they cause no stress. Slack suitcases reduce cognitive cost and have greater tolerance of error. They eliminate the stress of resisting temptation and contemplating tradeoffs. The person with the bigger suitcase looks more competent, even though he may not be.
The real or perceived existence of scarcity forces the poor to make tradeoffs, forces them to make objective rather than relative evaluations, makes it difficult to focus and eats away at their egos.
Whether its poverty of money or poverty of time, the same difficulties exist.
If I buy this, what do I not buy or if I do this, what do I not do.
Given what I owe, why am I still spending; given how much I have to do, why am I wasting time on non-essential activity?
Before we can begin to do something about the problem of poverty we need one more insight.
It is “The Irony of Poverty.”
The poor must make higher quality decisions (pack better, avoid temptation, make fewer mistakes) BUT the poor are in a worse position to make high quality decisions. They are distracted by other stresses, depleted by past failures, hampered by context and unappreciated (by those of us who don’t get it).
What can be done about this?
Institutions and contexts can ease the packing problem.
Behaviorally informed regulation can help.
Thanks to Professor Shafir, I think we all got it.
Respectfully submitted,
Marge D’Amico
The invocation was led by Don Edwards.
Gerry Berkelhammer read the minutes of the April 6th 2011 meeting.
There were no guests.
The attendance was 82.
Ruth Miller introduced the speaker of the day, Eldar Shafir, Professor of Psychology and Public Affairs at Princeton University.
Professor Shafir’s research focuses on the examination of reasoning, judgment and decision-making in situations of conflict and uncertainty. Specifically, his current efforts focus on decision making in the context of poverty.
His topic was entitled “On the Psychology of Scarcity.”
In a mere 60 minutes Professor Shafir addressed some of life’s great imponderables, including:
Why it is that people who should or could know better have such bad judgment?
Why it is that we, who certainly do know better, are all wrong about them…i.e. why we just don’t get it?
And how unpacking “the packing problem” can help us make better decisions about such intransigent issues as poverty in America.
Professor Shafir began with a 2-minute review of behavioral psychology 101.
While we pondered this overview, he cleverly made the leap to how these psychological insights could lead us to a better understanding of “the problem of poverty.”
He concluded by unpacking the “the packing problem.”
He began with a classical example of seemingly reasonable people making terrible decisions. He described the “Milgram Obedience Studies” wherein “teachers” (i.e. unsuspecting middle-aged men from New Haven) punished “learners” (actually clever actors with scripts) for their wrong answers by administering an electric shock. The voltage increased with each incorrect answer from mild to severe. Students complained of pain, threat of heart attack but the authority ordered the teachers to continue. And continue they did.
The purpose of this exercise was to prove that although this terrible behavior could have gone on in the 1940’s in Germany, it could never happen in our democratic society.
Rational adults were asked to predict at which point the “teacher” would refuse to obey.
Everyone predicted disobedience at 135 volts, certainly not beyond 300 volts. Even a psychiatrist predicted only 1/1000 would go beyond 450 volts. They were, of course, all wrong, wrong, wrong.
Every participant obeyed up to 300 volts and 65% went to 450 volts!!
Why would people who should know better, behave so inhumanely?
Well, that‘s the part we (who know better) just don’t get.
More depressing is that had we been there, we would have done the very same thing.
The Lesson is simple: The power of the situation (the context) completely dominates any rational behavior.
While we pondered this insight, Professor Shafir cleverly made the leap to Poverty in America!
The facts are stunning.
43.6 million people were in poverty in 2009.
58.5% of American spend at least one year below the poverty line.
Half of US kids will get food stamps.
Poverty is a deeply social, psychological state
There are two dominant views of poverty.
It’s a rational choice: the poor understand their choices and make them rationally.
It’s a pathology: the poor do not understand their choices and need to be educated.
Or neither: the poor are like us, i.e. somewhat confused and doing the best we can.
Each view has policy implications for dealing with the issue of poverty.
The examples of decision making in stressful situations are legion and demonstrate dramatically the divide in low and high income earners. These examples help us understand why the poor are “unbanked” and why Indian vendors get into debt traps
The disadvantaged don’t look so good: they are more obese than we are, don’t take their medication, are harsher parents, have outstanding credit card balances and they don’t even farm well.
Why is this?
One view is that the evidence is flawed; another that the poor need to be taught. We could also reason that that’s why they’re poor or it’s because they’re poor. Take your choice.
How to understand this behavior? The Shafir approach to understanding poverty is to see it through the lens of “Scarcity.” Conditions of scarcity (money, time, friends) produce their own psychology with specific behaviors.
Thus we arrive at “ The Suitcase Metaphor.”
Slack suitcases are easy to pack, and therefore, they cause no stress. Slack suitcases reduce cognitive cost and have greater tolerance of error. They eliminate the stress of resisting temptation and contemplating tradeoffs. The person with the bigger suitcase looks more competent, even though he may not be.
The real or perceived existence of scarcity forces the poor to make tradeoffs, forces them to make objective rather than relative evaluations, makes it difficult to focus and eats away at their egos.
Whether its poverty of money or poverty of time, the same difficulties exist.
If I buy this, what do I not buy or if I do this, what do I not do.
Given what I owe, why am I still spending; given how much I have to do, why am I wasting time on non-essential activity?
Before we can begin to do something about the problem of poverty we need one more insight.
It is “The Irony of Poverty.”
The poor must make higher quality decisions (pack better, avoid temptation, make fewer mistakes) BUT the poor are in a worse position to make high quality decisions. They are distracted by other stresses, depleted by past failures, hampered by context and unappreciated (by those of us who don’t get it).
What can be done about this?
Institutions and contexts can ease the packing problem.
Behaviorally informed regulation can help.
Thanks to Professor Shafir, I think we all got it.
Respectfully submitted,
Marge D’Amico