Scarcity of Money? Or Time?
How is it that I never find the time to blog? My answer would be that I simply do not have the time. But of course I have the same hours in a day as my co-bloggers. I could argue that I have more demands on my time, but I know very well that we are all busy. Scarcity, a book by Sendhil Mullainathan and Eldar Shafir, has many lessons for busy people, including those of us who are busy thinking about the difficulties faced by people who have a scarcity of income or disposable income after debt.
The book looks at scarcity in varied contexts such as time, money, food, friendship. It argues that there is a common logic to situations of scarcity: a mindset that captures our attention and changes how we think. At an optimal level, scarcity can create positive focus. But the same capture of the mind can preoccupy us and make us vulnerable to poor thinking and impulse control. The authors find, for example, that being poor reduces a person's cognitive capacity more than going one full night without sleep.
The implications for those in financial scarcity are powerful, particularly in terms of policy intervention. The authors focus on the need for "slack" in program design; for example, job training programs with modular classes that can be taken out of order so if a person misses a class, they can more easily make up the class rather than falling behind on linear content and having to drop out.
My thinking went to chapter 13 and the debate about a "cushion" in chapter 13 plans. While some judges and trustees permit this (or even insist on it), others see it as an indication of weakness. If you deserve a discharge, you need to learn within limits. The scarcity of a confirmed chapter 13 plan, with its 100% draw on all disposable income, creates a mindset that can itself be harmful. People with some financial slack may, in fact, be better able to build the financial habits and position themselves for the rehabilitation that is bankruptcy's goal. Building financial savings into chapter 13 as a necessary expense would reduce the cognitive burden of bankruptcy and insulate people from the harms of financial scarcity after bankruptcy. The result, according to the research of Mullainathan and Shafir, would be debtors emerging from bankruptcy with better self-control, more focus, and stronger decisionmaking.