Mineral Wells Index, Mineral Wells, TX

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December 31, 2012

Slate: Vow to do less, not more

(Continued)

NEW YORK —

The time-scarce contestants played the Feud with greater focus, throwing out more answers and getting more correct responses per second. They were exhibiting the tunnel-vision brought on by scarcity. But a funny thing happened when the experimenters introduced the opportunity to borrow against future rounds, at a usurious interest rate of one second now in exchange for two seconds in subsequent rounds. The time-scarce, focused as they were on the round in progress, were much more likely to borrow. Introducing the possibility of borrowing resulted in lower scores for the time-poor overall — the seconds they borrowed in desperation during early rounds resulted in very short times later on, so short that it hindered their performance rather than helping it.

The Feud contestant who shortsightedly undermines his future by trading two future seconds for one second in the present helps to illustrate the mindset of a person making a decision when faced with scarcity. A time-starved person rushes to meet deadlines without taking the time to order his affairs for the future, and thus sinks further and further behind. And the further behind he falls (on time or money) the more his mind wanders away from what he should be thinking about, like his long-term finances or his crammed calendar, and back to the mess of the present.

When you think about the distracting and sometimes paralyzing effects of scarcity in this way, you can appreciate how someone living paycheck-to-paycheck and intent on paying this month's rent and utilities may end up so focused on this immediate goal that he digs a deeper financial hole, by taking out payday loans or otherwise mortgaging the future. The stresses of scarcity leave insufficient energy and attention to make sensible long-run decisions. Essentially, Mullainathan and Shafir argue that the poor aren't necessarily impoverished simply because they make bad financial decisions. Rather, it's the stresses of poverty that lead to bad financial decision-making in the first place. And again, the same goes for the time-deprived: Harried people make bad decisions about their time because they're so starved for it.

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