Lit Review: Scarcity and Character

How do circumstances and character interact? Parents and teachers work to instill character strengths in children because they have a role in shaping circumstances. (For a comprehensive summary, see Heckman’s latest.) On the other hand, circumstance shapes character, too, as Sendhil Mullainathan and Eldar Shafir convincingly show in their book Scarcity.

When resources like time, money, friends, or food are scarce, people act differently. Mullainathan and Shafir explain that scarcity demands effort and attention. It makes people experts on the resources they lack, but reduces their ability to successfully apply themselves to other tasks or decisions. And this is true for everyone: from a well-paid academic strapped for time to a low-wage worker struggling with payday loans.

The Scarcity Effect

This scarcity effect is well illustrated by two of their findings:

IQ test scores fell when poor people were asked to think about a large, unexpected expense. American shoppers were asked to take a cognitive test after being told to consider, hypothetically, that their car broke down and needed repair. One group was told that repairs required $150. Among this group, high-income and low-income shoppers performed similarly on the test. The other group was told that they would have to pay $1,500. Among this group, low-income shoppers performed worse than high-income shoppers on the test after the sizable expense forced them to consider their tight finances. High-income individuals, who could still afford a $1,500 repair, did just as well on the task.

When resources are scarce, individuals display lower cognitive ability and more impulsivity. Indian sugar cane farmers performed significantly worse on tests of IQ and executive control directly before their harvest (in a period of scarcity) than after their harvest.

Scarcity and Social Mobility

These findings have implications for social mobility. It’s hard for low-resource individuals to climb the income ladder when their cognitive ability and impulse resistance are taxed by scarcity. The authors present a handful of interesting policy ideas to help lessen the burden of scarcity for the poor, including:

  • High-fee loans that funnel fees into a savings account
  • Simplified and more flexible training programs
  • Unemployment insurance against weekly fluctuations in work hours

In our new Character and Opportunity project, we focus on the importance of character strengths that enable individuals to move up the ladder, like the persistence to show up to work on time, the resilience to keep studying after a bad grade, the prudence to work long hours today for a promotion in the future.

H.G. Wells railed against “all this cant about character,” and many contemporary liberals share his discomfort on the grounds that it implies poverty is a moral failing: lack of character causes poverty. Scarcity presents an important corrective: poverty causes a lack of character.

A Third Way on Character and Poverty

Conservatives are right that certain character strengths enable success and can guard against becoming poor, and liberals are right that the experience of being poor itself prevents individuals from developing or deploying strengths like persistence, resilience, and prudence. The challenge is to have a sensible conversation based on the insights of both.