Understanding Scarcity

One of the things life has taught me is if you want to do anything meaningful and/or difficult with someone else, it is vitally important to try to see the world, or at least your hoped-for collaboration, through their eyes.  This is true regardless of whether or not you agree with how they are viewing things.  Simply understanding their point of view is a great asset.  (In fact, I think it is more important if you don’t agree with them.)  Sometimes people won’t tell you what how they see things.  Sometimes they don’t even know themselves.  But with effort — usually in the form of asking some questions and simply giving it some thought — it is possible to get a good sense of where people are coming from and how they view you and the collaboration.

An important new book looking at poverty through the lens of behavioral economics

If you are reading this blog, you probably have wondered how the world looks from the perspective of a poor woman in Haiti.  Trying to be helpful to them through involvement in organizations like Fonkoze is easier if the end clients’ worldview is not totally foreign to you. That is true whether you are delivering a product or service to their doorstep or trying to spread the word about organizations like Fonkoze in your church or Rotary Club (to cite just a couple of examples).

Perhaps you have even interviewed Fonkoze clients, or other beneficiaries of microfinance or other anti-poverty programs, or just had an informal chat with a random person whose socio-economic status was well below yours.  Or maybe you have read accounts of, or talked to, people who have conducted such interviews.  (My book Small Loans, Big Dreams tries to allow the reader to get intimate view into the lives of low-income women in rural Bangladesh and urban Chicago.  The book Portfolios of the Poor adds many additional insights.)

It is possible to get fairly deep insights into how the world looks through the eyes of a poor person by interviewing them at length and observing them as they go about their lives.  However, initial perceptions are often incomplete, or flat out wrong.  In my interviews in Bangladesh, I was learning new information a full two years after I began talking to the women about whom the book is written.  I also think it is useful to simply give some considered thought to the world looks to a poor person, even without conducting any interviews or reading.

Another way to approach this objective is through the emerging field of behavioral economics, which is basically the intersection of psychology and economics.  I have just finished an excellent book titled Scarcity: Why Having Too Little Means So Much, by Sendhil Mullainathan and Eldar Shafir.  It attempts to study the phenomenon of scarcity through the behavioral economics lens.

Poverty is a special case of scarcity, but their approach and findings are more general.  They also apply to scarcity of time (i.e., people who are too busy) and scarcity of human contact (i.e., people who are lonely), for example.  It turns out that the phenomenon of scarcity impacts the human mind and capabilities similarly regardless of what is scarce, and whether the person is rich or poor, male or female, Asian or American.

Their analysis explains a lot about why people under conditions of scarcity behave in certain ways, and do not behave in other ways.  In short, this condition enhances some capabilities but deforms others – in a fairly predictable manner.  For microfinance and human development generally, there are some important implications for practice.  In some cases, this analysis confirms and explains long-held assumptions.  In other cases, it challenges prevailing assumptions and current practice.

I also recall writing a blog about abundance in Haiti.  It turns out that abundance is related to scarcity in some important and unexpected ways.

I will be writing a blog about this book and what its implications are for holistic, double-bottom-line microfinance in the days ahead.  If I do not post it on this blog, I will certainly link to it.  I encourage feedback and ideas, both before and after posting these reflections.