[Reading Notes] Scarcity: Why Having Too Little Means So Much

My interest in behavioral economics has been heating up again lately. It was very interesting, especially considering the price.

Summary in a nutshell

・Scarcity is when what you have (time, money, connections, ability, etc.) is less than what you feel you need.
・Tunneling is the act of focusing exclusively on dealing with or responding to immediate scarcity.
・Processing capacity consists of two elements: "cognitive capacity," which handles problem-solving and logical reasoning, and "executive control," which handles planning and impulse control.
・Tunneling places a burden on processing capacity, pushing other potentially important matters out of your consciousness.
・Slack means looseness or slack; it has the effect of absorbing scarcity and minimizing its impact (financial slack, time slack).
・Slack can be wasteful, but it is also beneficial (distinguishing between the two is sometimes difficult).
・Not only individuals but also organizations fall into the traps of scarcity, lack of slack, and reduced processing capacity.

Impressions

Although it is marketed as a developing science, reading this book will help you understand the following:

・Why is it that firefighters are more likely to die in traffic accidents because they aren't wearing seatbelts?
・Why do the poor choose to take on debt instead of using safer financial products?
・What was the surprising measure taken to reduce overtime in a hospital where the operating rooms were always full?

For example, if you are working an 8-hour day and you are logging a full 8 hours of man-hours, that means there is zero time slack, which translates to a load on your processing capacity, so it doesn't seem to be a very good state.

Recently, I think some companies have been adopting a 3-day weekend or 6-hour workday, and since these increase slack, they might actually be quite effective.

By the way, applying this to myself personally, it felt like this:

・Changing jobs increased my financial and time slack.
・Working remotely more often has decreased my time slack (I tend to work too much).
・The increase in multitasking is starting to increase the load on my daily processing capacity.

Notes

Scarcity not only causes dissatisfaction due to a lack of resources, but it also unconsciously occupies your thoughts and attention. While you may be able to deal well with pressing needs by exerting limited strengths, you end up neglecting other things, leading to a decline in ability in other areas.

When we think about poverty, we focus on money, or when we think about loneliness, we think about a lack of time or friendships. However, at a more abstract level, scarcity causes a lack of processing capacity. Processing capacity affects every aspect of behavior.

I understood intuitively that deadlines are effective, but it makes perfect sense that this is due to a scarcity of time. In reality, you are in a state of much greater time scarcity the day before a deadline than a week before. As a result, while you can focus, you cannot do anything else. When you trigger tunneling, you push other things (which might be more important) outside the tunnel. Multitasking is a sign of tunneling. You can save time, but there is a price to pay.

I use the term processing capacity to encompass the ability to resist temptation, the ability to pay attention, and the ability to make wise judgments. Processing capacity is burdened by tunneling. Not only external factors (noise, TV, etc.) but also your own thoughts (which cannot be ignored) create endogenous confusion due to scarcity (mind-wandering).

When processing capacity is burdened, it not only leads to a decline in fluid intelligence where impulses cannot be suppressed, but it can also weaken self-control. And poverty increases the burden on processing capacity. The poor have lower processing capacity than the wealthy, not because their own abilities are lower, but because their processing capacity is constantly burdened by scarcity. When burdened, you have to manage with fewer mental resources.

Slack refers to the extra space in a suitcase (originally meaning looseness or slack). There is time slack and money slack, and the poor have less of this slack. For people who are not very busy, slack absorbs mistakes, so the impact is minimized. In contrast, busy people cannot easily escape from that state. Whether it's trying to squeeze out an extra hour or making the same mistake, the impact is greater.

When in a state of scarcity, you not only lack the margin to fail, but you could also say that there are more situations where you will fail. Having slack makes you feel wealthy. Slack is not just inefficiency; it is also a luxury of the mind. If you have financial slack, you don't feel like you have to give up something else when you buy something. If you have time slack, you can complete a task without being distracted by other tasks. Slack is both wasteful and beneficial. Distinguishing between the two can be very difficult.

The poor are closer to economic models, but behavioral economics was born precisely because people often do not act as economics predicts. The focus that brings expertise is accompanied by tunneling, which has various negative effects.

People who experience scarcity don't just experience it now; they usually experience it later as well. The scarcity happening now creates tunneling and leads people to myopic behavior, but this is not an individual's laziness or character trait. Laziness does not cause poverty; poverty causes laziness. Improving scarcity involves changing the environment and understanding human psychological processes as a path to a solution.

People think about time and money, but they do not think about processing power. They do not know about the rhythms of intelligence. We must understand that having a margin, which may seem like a waste at first glance, protects us from scarcity.