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Monday, December 23, 2013

SCARCITY: WHY HAVING TOO LITTLE MEANS SO MUCH (audiobook) by Sendhil Mullainathan and Eldar Shafir

Published by Simon and Schuster in 2013
Read by Robert Petkoff
Duration: 8 hours, 47 minutes.

I teach in a public high school that is in the midst of transforming from a suburban/affluent to an urban/poverty school. I currently teach Spanish but I am also licensed to teach several social studies classes including economics. While this hardly makes me an economist, it does mean that I know enough about economics to make me dangerous to myself.

I always think that it is interesting when economists take on non-traditional topics, like the Freakonomics guys do. In this case Sendhil Mullainathan and Eldar Shafir look at the effect of scarcity on impulse control, poverty, time management, dieting and lonely people. Kids at my school have a horrible time with impulse control, poverty and time management so I was hooked when the authors started to look at how scarcity affects these behaviors.

Through a series of studies (theirs and others) they demonstrate that people who are financially insecure, lacking food, lacking companionship or are too busy tend to tunnel vision and make decisions that make sense in the short term (like rolling over a payday loan because there is not enough money to pay the rent now) but make little sense in the long term (the payday loan will just get bigger and harder to pay every time it is rolled over to the next month and there will also be rent to pay next month). They postulate that the human mind is like a computer in that it has limited computational resources. If you run too many programs on the computer it bogs down. If you tax the human mind with too many preoccupations it bogs down as well. They call this taxing the mind's "bandwidth." The interesting studies that are detailed in this book show that that this bandwidth tax can result in up to 13 IQ points loss in the same people.

That difference in IQ points explains a lot of the lack of impulse control and poor financial decisions. I see it all the time at my school. A student's grade crashes and when you talk to a parent you find out that the kid's parents are getting a divorce or one of them has lost a job or a big brother is in jail or they were evicted or something else is taxing the kid's bandwidth. The author's go to pains to note that this is different than just stress. This is a crushing preoccupation.

In economic theory there is a useful affectation called homo economicus - economic man. Economic man responds rationally to incentives and is the stand in that shows the supply/demand curve in action (For example, does homo economicus buy the upgrade smart phone at the store for $300 now or online for $245 even if he has to wait a week to get it?). Well homo economicus makes sense on paper but this book gives us the studies that show why real people don't always act in the same ways.

The studies are interesting, the conclusions are fascinating and there are even some practical suggestions offered. I found it to be quite enlightening.

I listened to the audiobook version of Scarcity and I thoroughly enjoyed the narration by Robert Petfkoff - his style blended perfectly with the "for the layman" writing style of the authors. In addition to being interesting, this book was just a great listen.

Note: I was sent a copy of this book by the publisher through Audiobook Jukebox's Solid Gold Reviewer Program in exchange for an honest review.

I rate this audiobook 5 stars our of 5.
Reviewed on December 23, 2013.

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