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The CGD Podcast
Scarcity: Why Having So Little Means So Much, an interview with Sendhil Mullainathan
00:23:46
My guest this week, behavioral ecomomist ,is a Harvard professor and non-resident fellow at CGD who is transforming how people think about poverty, and what can be done to support poor people in improving their lives. Sendhil was recently at CGD to...
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- [00:16]
A
Welcome to the Global Prosperity wonkast. I'm Lawrence MacDonald and I'm very pleased to have with me today Sindhil Moolaynathan. He is the author of why Having Too Little Means so Much. He's a professor of economics at Harvard and, and also, I'm pleased to say, an on resident fellow here at the center for Global Development where he co authored a paper, Behavioral A New Approach to Development Policy. And we're going to try and cover all of that in today's wonk cast. Sandal, welcome to the show.
- [00:45]
B
Thank you for having me.
- [00:47]
A
I've been trying to get you on the show for a while. You're here for an event today. We're going to be talking about your terrific new book that gave me an excuse to start to read it. And I was amused to find that in the very first pages you discuss how you had to write the book because you found yourself so busy and you kept saying yes to things that you then weren't able to do. And so I realized just how busy you are. And then there's another wonderful piece where you talk about packing a suitcase and the difference between having a suitcase that's big enough for what you want and one that's too small. So you showed up today and I maybe embarrass you a little bit, just a little bit late. And with a small suitcase that was overflowing.
- [01:28]
B
This book is partly just self help psychotherapy for myself.
- [01:32]
A
So what's the big message about scarcity? There's a connection between the scarce time of affluent people like you and me and the scarcity that confronts poor people and indeed very poor people. What do they have in common?
- [01:45]
B
Yeah, so I would say that one of the big messages is just even the realization that when we say I have too little time and the poor say I have too little money and, and the dieter says I'm struggling with being able to eat less. That all of these things are not just connected by a word, scarcity. That there's actually a psychology of scarcity, something that kicks in when we have too little. And that that same force kicks in whether you're a busy CEO or whether you're a poor person living on a dollar a day. That that psychology is the same and universal.
- [02:19]
A
And that psychology, in a word, is not enough bandwidth.
- [02:23]
B
Well, I would say the primitive psychology is even more trivial. And that's one of the funny things about this, is there are a bunch of trivial things that add up. So the primitive psychology is when you have too little, your mind automatically focuses.
- [02:37]
A
On that focuses on the thing you don't have enough of. You have this wonderful story about the starvation experiments in the end of World War II, where the men who were being deliberately starved to find out how they could feed people being liberated in Europe could only think about food. We kind of all know that. But you uncovered other things looking at that study.
- [02:54]
B
That's right. And so the fact that when you're hungry, all you can think about food is so intuitive. But then when you unravel that, you realize, huh, when I'm working on a deadline, it's amazing how automatically my mind keeps going back to that project. Or when you're poor, you automatically keep going back to, I have rent to make this month. So in a way, I think it's the power of that force, the power of the lack of something to capture our mind. And just the sheer magnitude of that thing, that was a big surprise for me.
- [03:25]
A
So you become preoccupied with that thing, perhaps to the detriment of your ability to address the problem.
- [03:32]
B
Yeah. And I think that a good way of thinking about it is, well, let me start with the positive for a second. It's really good that you get preoccupied when you're hungry. It's good that your mind keeps saying, hey, have you noticed we need food? I don't know if you got my last message. We need food. That it keeps coming back to you. That's a good thing. And it's a good thing for the poor. It's a good thing for the busy. For the busy. This is the reason why you are so productive when you work on deadline, because your mind is just focused on this thing and other things can't intrude. And it's the reason why. Actually, we find lots of evidence that in many ways the poor are terrific at stretching a dollar because they really understand the value of a dollar.
- [04:12]
A
So that's the good side.
- [04:13]
B
That's the good side. Now, the bad side is you can see it in yourself. Like when you're working on deadline, you're so good at making this project work well. But think of all the stuff you put off. Now, some of the stuff you put off is like playing solitaire. You're happy with that. Some of the stuff you put off is like that other report that's due the week after. So now what happens the next week? Well, you're behind again. So this tendency to sort of tunnel on making ends meet is one of the big problems that all of a sudden you're. Now, actually, there's this writer. Many people have read the 7 Habits of Highly Effective People by Stephen Covey. He has this wonderful thing about how we often end up focusing on the urgent and neglect the important. That, in two words, is, I think, one of the big problems of scarcity. We tunnel on the urgent and then we neglect the important, which is not urgent.
- [05:04]
A
So in the second half of our interview, I want to come to development implications, but I just want to bridge quickly to the poor, since we're mostly concerned with poverty here at the center for Global Development. I know it's a big interest of yours. Give me an example of a poor person who's focused on the urgent and neglects the important because of the scarcity that she faces.
- [05:21]
B
Yeah. So let's suppose that you're a rag picker and you currently rent a cart, which is the cart that you put all your rags on, then you're renting and you may say, wow, I could buy this cart. If I bought this cart, I would earn back the amount I pay in rent within six months. So why not save up to buy it now? Saving up to buy it is important, clearly important, very high return. But it's not urgent. All the payments, all the stuff that you have to address right now is urgent. So now the rag picker puts off this important thing.
- [05:59]
A
It's not that she just literally couldn't find the money. That's what I would think is she's just too poor, she can't buy this. But you're saying she could get credit or she could put aside a little bit every day and somehow buy the cart if she could only focus on it.
- [06:12]
B
That's right. Think of a very busy person who puts off going to the doctor for that preventive test. Also important. And locally they may say, I'm too busy for it. But we all know when we say that that's not true. True, because when we look to next week, we don't feel too busy for it. It's that we have this very local thing where we're fighting fires all the time. So the urgent preoccupies our mind when we look to the past. And you said, well, of all the things you did, did they all dominate going to the doctor for this test? You'd say, well, no, especially when it.
- [06:42]
A
Turns out you've got cancer. Then it's like, gee, I really could have found time for that test. Is that related to this notion of scarce attention, of bandwidth?
- [06:51]
B
Yeah, I think that's right. And I think that what happens is we are putting so much of our bandwidth on fighting fires. On dealing with the urgent, then we don't have bandwidth for the important stuff that's in the future. But it's also the case that we also don't have bandwidth even for important things right now. So, for example, you're working hard on a deadline, but you go home to spend time with your kids. Unfortunately, you're not all present there. Your mind, when you're with your kids, still keeps going back to that project that's due. And this is the most pernicious aspect of scarcity. Like, you know, when you're hungry, whatever you're doing, your mind keeps going back to food. You can't concentrate on the task at hand. The same thing is true.
- [07:33]
A
Even going to cookbooks that are of no help. I mean, it's one thing I'm thinking about the food that I might grab, but to think about imaginary food doesn't really help me.
- [07:40]
B
Exactly. And that's the funny part. The mind keeps calling these things to attention. You can't work on your project. You're at home, you're trying to play with your kids, but your mind is like, what about that project? What about that project? And that means that you just have less bandwidth for the rest of life. You're just not. And in some sense, we've all experienced that with time at one point or another, going to the poor, they have this part of their mind that's always going back to money, that's always saying, oh, how is rent going to be made this month? And I think the most surprising part is that the logic of this, I hope, feels intuitive to you. The magnitude is shocking that it is. Just the sheer size of this fact is very large.
- [08:20]
A
You have a wonderful example in the book of the Mars orbiter and how they were so focused on meeting the deadline that, you know, the thing went to Mars and it crashed into Mars because of a mistaken calculation that involved conversion of metric into British that. That they hadn't noticed this obvious thing that middle schoolers might get tripped up on. It's a wonderful story. I urge people to buy and read the book, but it made me wonder if you. I'm sure you've thought about this, you may have even written about it. But the debacle here in the United States of the launch of healthcare.gov, where they were so focused on meeting the deadline that they overlooked all kinds of seemingly obvious things. They didn't have a dashboard for the computer system. Have you been thinking about applying your framework to explaining that particular disaster?
- [09:13]
B
That's a totally good question. I mean, I have, I even wrote up a little piece and then I decided to trash, literally put it in the folder. Because it's always when wounds are fresh, nobody wants someone to come and say I told you so. But it is just a general lesson that we are bad at creating scarcity. That is, we want to create scarcity like deadlines to encourage us to work harder. We want to benefit from the deadline. So in a way that's great, like because there was this deadline healthcare.gov must launch. But we do it badly because the thing deadlines do is they create this incentive to take shortcuts and that can lead to some big problems. And that's what I think these big deadlines to launch these huge projects end up failing on. If instead we had more nuanced, you know, sort of moderated deadlines, well, we're going to go live with the beta. That's like a sharp deadline, but we know there'll be plenty of bugs.
- [10:05]
A
Okay.
- [10:05]
B
And then we're going to go live.
- [10:06]
A
Series of interim deadlines. Good lesson for all of us. I'm going to take a break and when we come back, I want to turn to the paper that you wrote with Sugata Datta who's also, I'm pleased to say here today will be serving as a discussant when you present your book on applying some of these insights to the design and administration of anti poverty programs in the developing world. This is the Global Prosperity Wonkast from the center for Global Development. My guest today is Tendul Mulaithanan and we're discussing his book joint with Eldar Shafir, why Having Too Little Means so much. We'll be back in a moment. Welcome back to the Global Prosperity Wonkcast. My guest today is Sendhal Mulathanan. We're discussing scarcity, why having too little Means so much and a working paper that Sendhil wrote together with Sugato Datta Behavioral A New Approach to Development Policy. And if you're interested in these things, I commend not only the paper but an interview that I was able to do with Sugato a while ago that's available on the Woncast. I had a chance to look back at the paper today, Sendhil, and the thing that really struck me about it, and I must say that I learned today the paper predates the book. The book is brand new. The paper's been out for a couple of years is you unpack some of these insights that are in the book and come up with quite practical solutions to the design and Delivery of anti poverty programs. One of them is you talk about scarcity of self control. Talk to me first about why poor people might have a scarcity of self control and then how those who aim to help them might design programs to address that problem.
- [12:02]
B
Yeah, so I would say that, let me start by saying we all have a scarcity of self control. That, you know, self control is a thing that's hard for all of us. The reason that the poor may particularly lack it. As we talked a little bit earlier about bandwidth and how experiencing scarcity can reduce bandwidth. And one of the biggest effects of having low bandwidth is self control is compromised. And if you just look in your own life, it's totally intuitive. Think about yourself on deadline. That's the time you probably eat the most donuts and the least healthy. Because your mind is so focused on one thing, it's very hard to move it away. You even feel it, you're like, oh whatever, I'm just not gonna wait. And that's the lives of the poor. So if you think of that, you can see why self control becomes hard. And I think that for me, let me step back before we even think about designing solutions for it. I would say that this is the biggest mistake policymakers make involving the poor. When they think about what the poor are short on, they say, oh, the poor lack money. So when we design programs, we make sure no one would design a program that said, I'm going to charge you, you person who makes a dollar a day, $50 up front for the program. Because then we'd say obviously they can't afford it. That'd be stupid. But we also know the poor lack bandwidth and lots of people design programs that tax you in bandwidth up front. So you design a conditional cash transfer and what do you do? You say, oh, well, in order to get this money, here are all of these things you need to do. Now I'm not saying that's a bad idea. Obviously conditional cash transfers are good. But much like we're very careful to account for the user costs of other programs, did we account for the fact that each of these conditions imposes a bandwidth user cost, a self control user cost? Oh, you need to make sure that you show up at these meetings. We just add that in because why not? I mean it's an incentive show it up. But for that.
- [13:55]
A
But because these people are probably lazy anyway. That's sort of at the worst of it, people imagine that, you know, they're indolent and you know, telling them to come to media got nothing better. To do. In fact, they're working their asses off, right?
- [14:04]
B
And they're working their asses off and actually following through, actually remembering about those meetings, actually getting yourself when you're feeling like, my God, I'm really exhausted to say, okay, I should go to the meeting. Because there's an incentive that all requires self control, that all requires bandwidth. And this is not an infinite resource. If we tax it in one place, there is less of it elsewhere. So even if your program is quote, working because I got people to come to the meeting, at what cost? The cost of some self control, which you're not even measuring. Maybe that person then goes home and doesn't engage in some other preventive care, which you were trying to do. Maybe they don't put up their career.
- [14:39]
A
You mentioned in the book. Or they neglect their children.
- [14:41]
B
Or they neglect their children. Right. It's some level. It's as if we're doing the worst thing you could do in economics, which is we're not measuring a resource and treating it like free. That is like the biggest. No, no in economics. And we're doing that right now with cognitive resources.
- [14:55]
A
And how would a program be designed to avoid that problem?
- [15:00]
B
So I think part of what we would have to do is, and I think people are starting to do this is just even to start by recognizing, okay, if this program is there, what are the cognitive costs I'm putting on the person? You know, we can identify them. These are not vague costs. Do they need to remember what's the bandwidth that they need to do for self control? And these sound qualitative, but before you can make things quantitative, you have to do the qualitative. So at least being cognizant of it. And there's sometimes people make cost benefit into this very accounting. Like we have to put exact numbers. You'd be amazed that just saying think of the cost benefit already qualitatively like, yeah, there's no way this adds up. You go and look at the conditional cash transfers and you look at the bottom 10 conditionalities, you look at them and go, yeah, once I realize the bandwidth needed, it's hard to believe that there's no. I mean, I'm not even talking about quantitative. Just a qualitative week. It's fine. And it just imposes a discipline on the system that every new thing we add is coming at some cost. Even as a team just deciding, could this even possibly be worth the cost? I think we'd already see some sensibility.
- [16:02]
A
If I remember correctly, it's been a while Since I've read it in the paper with Sugata, you look at fertilizer purchases and the timing of that and how, if I remember correctly, after the harvest when people have relative abundance, their cognitive ability improves, their ability to plan improves, but that's not the time when they're buying the fertilizer. Tell me that story.
- [16:23]
B
Yeah, so we find in this. Before looking at the fertilizer data, we did this study where we looked at really just bandwidth. What is the bandwidth of people, the farmer, the month after harvest when they're rich.
- [16:36]
A
How do you measure that when you say you looked at it?
- [16:37]
B
Yeah. So there's IQ measures, just very straightforward IQ measures. And then there's something called executive control, which is a form of self control. There are these tests that psychologists have discovered, developed for the last 50 years that are actually quite striking. You can measure your executive control and then you'll see that when you're drunk you have less. You'll see that when you're sleepy you have less. You'll see that when you have less executive control, you're more likely to do impulsive things like yell at people or whatever.
- [17:03]
A
What would be an example of a simple test like that that I might take?
- [17:07]
B
Yeah, so a classic one is called Heart and Flower. And what it would do is you would see a screen on the left hand side or on the right hand side would be a heart. And then you would be told whichever side you see the heart hit that side. But when you. And then sometimes a flower appears. Now the rule is when you see a flower hit the opposite side and this sounds so trivial, but what happens is you get used to hitting the heart and then when a flower appears, you. If you're being very automatic, you'll hit the flower. But the rule is you're supposed to hit the opposite side.
- [17:38]
A
Got it.
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B
So when you're totally controlled, you are able to do that. When you're kind of a little fuzzy, you can really see it.
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A
After my second martini, I'm not going.
- [17:45]
B
To do so well.
- [17:46]
A
Or at the end of the planting cycle when I've exhausted my reserves.
- [17:51]
B
Exactly. And that's what we find. We find. I've mentioned this before, that the effects are big, but let me calibrate how big they are. It's not just that the farmer is lower in IQ and lower in executive control. Before harvest, the effect is about. So here's an example. There are studies on sleep psychology which where they've had people pull all nighters, literally no sleep, and then they see the effect of that on IQ, on bandwidth, the effect of harvest is about 3/4 of that effect. So it's as if when the poor are poor, they're pulling an all nighter every day. So it's a huge effect.
- [18:27]
A
So the way I feel after the all nighter is the way that they're feeling all the time.
- [18:30]
B
Exactly. And so then you really fundamentally, to me, that changed my entire, I mean it's not just a small, oh, they're thinking about money. I mean I wouldn't, I mean if somebody looked at me after an all nighter, they would conclude falsely, or maybe in my case truly, that here's a person who lacks self control. Here's a person, but that's not true. It's not a person who lacks self control, it's a person who just pulled an all nighter. Similarly with the poor, it's not a poor person who lacks cognitive capacity. They're just a person burdened by poverty. And that's a very different view of who they are.
- [18:57]
A
In the case of the fertilizer, was there a relatively simple solution? Am I remembering correctly?
- [19:02]
B
Yeah. So Esther Duflo and Michael Kremer and John Robinson have a beautiful paper where they, they tested an interesting fertilizer solution which was, to a first approximation, why not get people to make their fertilizer decision post harvest when they're both cash rich but also bandwidth rich? And that's something we forget because you're bandwidth rich in these periods. That's a great time to have you make decisions. That's a great time to have you even do education. So for example, if I was to do an HIV education program, people don't think about this, but that same program, pre harvest is a terrible program because you're getting all these people who may be sitting in your class but they're not listening. And what happens is we think about time and we say, look, pre harvest people aren't doing much, they've got nothing.
- [19:47]
A
To do, they're waiting to harvest the crop. Great time to do a class.
- [19:50]
B
Exactly. But unfortunately it's a terrible time to do a class from a bandwidth point of view. So once you understand the texture that there are times when people are rich in bandwidth, those are the times we'd want to convey information. Those are the times that we'd want to have people make decisions like do you want fertilizer for next period? And I found this useful in my own life. Actually before this, I rarely thought about the timing of big decisions. And then I realized, it's funny how often we End up making big decisions without doing a check about, like, is this a bandwidth heavy moment for me? And you know, you're very busy and you're like, okay, I've got to make this choice, I've got to decide, well, that's not a good time because, you know, your mind is preoccupied. You, you're just making a huge choice about which a lot of things will follow at a bad time.
- [20:34]
A
This feels like one of those big discoveries that once people learn it, you know, I've read pieces of the book, pieces of the paper. I'm sure there are many nuances I don't understand, but the big idea I kind of get. And it's one of those ideas sort of once you get it, you can't forget it. It changes how you think about the world. It's one of those ideas that seems to have the potential to kind of change everything. Have you seen this being picked up in policy circles? And it's certainly in the pop culture. I mean, this notion that attention is a scarce commodity and something that you need to be cognizant of and that it's true for the affluent as well as the poor is now part of the pop culture. And, you know, perhaps you're not the only one who's writing about it either, but what is it like to sort of. How do you see this knocking on in the wider world?
- [21:21]
B
So I am, I've been very heartened to see that a lot of people in policy circles are now starting to take it seriously. It's like, in a way, now I feel like people are getting cognizant of and starting to design policy. I just got an email this morning that the Dutch government is doing something with health insurance based on these ideas to say, let's do a little experiment to see if we can't free up the bandwidth of people who are sort of just very directly based on this. And I think that once people like you said, for me too, once you start thinking in these terms, it just opens up things you never noticed before. But then you feel like, oh, why didn't I notice this? And so I'm pretty confident based on what we've seen, that I think that's the nice thing about a perspective as opposed to a policy solution. I don't think this is about one policy solution, but I think if all of us start thinking in these terms, the natural creativity of people will open up many other policy solutions.
- [22:08]
A
And you say at the beginning of the book that this is relatively new, unlike other areas that are, well, plowed. Nobody's an expert in it and therefore you've gone to some length to write the book in a way that is accessible to non economists, people like me. But there's a wealth of notes in the back for those who want to go deeper.
- [22:28]
B
My mom, who does not read books, listened to the audiobook and said she understood all of it, which is probably the best thing that I could have heard about this.
- [22:36]
A
Well, I thank you for writing it. I thank you for coming on the show. It's 11 o' clock and there's an auditorium full of people waiting to hear from you, but it's delightful to have you on the show and congratulations.
- [22:46]
B
Thank you very much.
- [22:47]
A
This has been the Global Prosperity Wonk cast from the center for Global Development. My guest today is Tendul Mulathanan. We've been discussing his terrific new book together with Elder Shafir, why Having so Little Means so Much. You can find the Wonkast online on itunes and on Stitcher. Just search for Wonkcast or CGD and sign up to hear a new interview every week. I also want to commend to you if you're particularly interested in the development applications of this the CGD working paper joint with Sugato Datta Behavioral Design A New Approach to Development Policy. Both are available on our website. Until next time, I'm Lawrence MacDonald. Thanks for listening.