10

SCARCITY IN EVERYDAY LIFE

Doctors and the cable guy have one thing in common. An appointment scheduled for three o’clock rarely happens at three o’clock. Staying on schedule can be hard. A slipup early on—perhaps a bit of procrastinating or something that has run unexpectedly long—gets magnified when there is no slack to absorb this shock. What first seemed like manageable tightness becomes a cascade of lateness. Every appointment becomes rushed. You tunnel on getting through this appointment. Predictably, you borrow from future ones. A time-debt trap forms. A tight calendar leaves you on the edge of being late to every meeting. And on most days you go over that edge early. (Why customers put up with it is another question.)

A colleague of ours—the president of a foundation—is no stranger to tight calendars. He has the distinct pleasure of spending most of his days in back-to-back meetings. He could easily fall perpetually behind like the doctor or the cable guy, every meeting more delayed than the previous one. And since people are coming to ask him for money, they would put up with it! But he does not run late. About five minutes before a meeting is scheduled to end, his assistant shows up and announces, “Five minutes left.” And at the end of the meeting, his assistant shows up again. This fairly obvious intervention—used by many executives lucky enough to have a skilled and dedicated assistant—prevents the cascade and the scarcity trap.

The assistant knocking at the door is not a particularly innovative intervention, but it illustrates something profound. Small changes to one’s circumstances can short-circuit the consequences of scarcity. The psychology of scarcity is primitive, and changing it “from within” can be hard. But you don’t need to change the psychology in order to get the right outcome. The foundation president is not tunneling any less. His trick is to change the environment to counteract the psychology. And not even drastically: the assistant does not create additional slack. Meetings are still scheduled back to back, and the president still tunnels during these meetings. All the assistant does is stand in the way, preventing the psychology of scarcity from doing harm. You can think of it as akin to a rumble strip on the side of a highway. It’s a small change, yet it protects drivers against their wandering minds and fatigue; it’s much easier than getting them to focus or to sleep more.

In the same way, we can “scarcity-proof” our environment. We can introduce the equivalent of rumble strips and helpful assistants, using our insights into why things go badly to build better outcomes. What matters is the logic of the enterprise—the appreciation of how understanding scarcity can help us think differently and manage enduring problems.

WHAT IS IN THE TUNNEL?

A simple yet often underappreciated tool for managing scarcity is to influence what’s in the tunnel. This is one thing the assistant does well: she forcefully brings in the next meeting while the executive is still tunneling on this one. In work with the economists Dean Karlan, Margaret McConnell, and Jonathan Zinman, we tried to bring savings into the tunnel for poor individuals in Bolivia, Peru, and the Philippines. We built upon the insight that the poor fail to save partly because of tunneling. Saving is an important but not urgent task, the kind that nearly always falls outside the tunnel. At any point in time, there are more pressing things to do than save. So we brought savings back into the tunnel for a moment by making it top of mind. Having asked people what they were saving for and how much, we would send them, at the end of each month, a quick reminder—a text message or a letter. This benign reminder alone increased savings by 6 percent, a strikingly large effect given how infrequent and nonintrusive this was. (Messages, after all, are much less salient or vivid than an assistant standing in your doorway.) We were able to increase savings not through education or by steeling people’s willpower but merely by reminding them of something important that they tend to overlook when they tunnel.

Tunneling gives us a new way to think about financial products. Some financial decisions naturally appear in the tunnel. Someone has an incentive to ensure that you repay your loan or pay your rent. That person or institution, like the assistant, will bring it into your tunnel no matter how tunneled you are. Savings, on the other hand, has no dedicated assistants to care for it, and—absent a behaviorally informed intervention like ours—will end up outside the tunnel most of the time.

Of course, insights about tunneling can also be used to exploit. You might set high late fees and then not remind people of the impending charges. Many of these effects, from reminders to the impact of late fees, will disproportionately affect the poor, since they are the ones who are tunneling—and suffering the consequences—the most.

Reminders, of course, are not limited to money. A busy person will too readily neglect the gym, which is important but never urgent. Signing up for a personal trainer reduces this problem. Now the trainer’s calls bring fitness back into the tunnel. Now going to the gym becomes something that cannot be neglected: a trainer, intruding into your tunnel, is asking when you would like to come work out this week. The trainer is a constant presence, ensuring that the gym is top of mind.

Impulses, rather than reminders, are also easy to bring to the tunnel. Supermarkets have long understood this. They saw an easy way to make money: place candy bars at checkout counters. The candy intrudes into the tunnel in the form of an immediate urge: I want chocolate. Many urges are like this; however important or desirable they may be, they may be out of mind when they are out of sight because they are not pressing. But when they’re in sight, they assert themselves, pushing other impulses—in this case your weight-watching impulses—out of the tunnel.

Given this observation, why not do the same for savings? We did this in another project, with a product we call “impulse savings.” Much like candy bars, impulse savings cards are left to hang at prominent locations, such as next to cash registers. They have pictures on them that portray people’s savings goals—such as college, a home, or a car—designed, like a candy bar, to create an urge. Except that when they “buy” these cards, people are actually saving: the dollars they pay get transferred into their savings accounts.

The cards not only combat tunneling by bringing a person’s latent goal to the forefront; they also provide an easy way to act on it—“buy this card”—before the goal fades. In a small pilot program with IFMR Trust (a large provider of financial services to the poor), we found a surprising number of people eager to save in this way. A photo of one’s family occasionally emerging on a busy person’s desktop (irregularly enough to capture attention rather than becoming part of the background) may also work: make something top of mind that might otherwise be neglected.

Reminders can be powerful, yet they are often underappreciated, perhaps because they are so obvious. In 2008, the Massachusetts Registry of Motor Vehicles thought of a way to reduce costs. All the letters they were sending to remind people about their soon-to-expire car registrations were costly. So they got rid of these reminders. In a way this made perfect sense, but in light of our analysis, you can see why it might be foolish. Registrations expire at a fairly random time, solely a function of the last time you registered. Without a reminder, it is hard to remember the date. For the poorest and the most hurried, these reminders were likely the only thing that kept the registration from expiring and risking a ticket for the car owner. In effect, with this simple policy change the state had (inadvertently?) imposed a regressive tax.

Reminders are deceptively simple yet are often overlooked. Policy makers can spend millions of dollars in shaping attitudes toward savings but then fail to incorporate reminders urging people to save. We can spend hefty sums on gym membership yet never stop to consider what to do to ensure that the gym stays within the confines of our tunnel.

NEGLECT

Last year, we neglected our savings. In fact, it has been quite some time since either of us has thought about it. What causes this reckless behavior? (One of us even has kids!) Well, it’s actually not terribly reckless. Our savings accounts—from retirement savings to college savings for the kids—have been growing quite comfortably. How did we save without actively saving? The same way most people do. Each of us enrolled a long time ago in a plan that automatically deducts 10 percent from our paycheck. Our savings balances show that we saved a lot, even though our daily behavior suggests total neglect: we spend our paychecks without ever thinking about saving. Automatic deduction allows us to save with full neglect.

This example highlights a simple insight. When there’s neglect, it is often more effective to alter the outcome it leads to rather than fight it. Here is an example with retirement savings. When people in the United States start a new job, they need to fill out a form regarding their participation in a 401(k) plan. Typically, if they fail to fill out the form, they are not enrolled, which can be a recipe for disaster later in life. But when you have just been hired, with all the turmoil and anxiety that brings, you will often tunnel, and the form will get neglected. In one insightful study, researchers changed the consequences of neglecting the form. New employees received a revised form that said something along the lines of: “You are enrolled in a 401(k) at 3 percent. Turn this form in if you prefer not to enroll or to enroll at a different level.” Now, when people neglected the form, they were saving. And better yet, for all those who thought about it and wanted to save, everything was set—there was nothing at risk by forgetting. The results were striking. Even three years later, there was a dramatic difference in enrollment rates. At those companies where new employees had to opt out, more than 80 percent had enrolled in the 401(k) plan. At those companies where new employees had to opt in, only 45 percent had enrolled. Changing the default—what happens when a decision is neglected—can have strikingly large effects.

Of course, there are a lot of tricky policy issues with someone else setting your defaults. But in many cases you can set the defaults on your own. Automatic bill pay is a prime example. A busy person who enrolls for automatic bill pay no longer runs the risk—in the tunnel of work—of forgetting to pay her bills. Or, rather, she is free to ignore her bills, but when she does, those bills still get paid. As a result, some of the most persistent tunneling problems for the busy these days—at least for those who have access to modern technology—are those tasks that cannot be automated, like a car registration, a driver’s license renewal, or taxes. Worse yet are those that are not automated and do not have a natural deadline or reminder, like writing a will or getting a medical checkup.

This thinking applies more broadly, to things that are repetitive and predictable. Picture someone working at home and tunneled on a deadline. We know that they will neglect the quality of their eating; they will eat whatever they can find near at hand. In fact, distracted and depleted, they will tend to prefer the less healthy options, those most immediately tempting. With a pantry full of assorted options, this busy person will end up gaining a few pounds. In contrast, a pantry stocked with only healthy options can insulate the waistline from the deadline.

A recent Bank of America program called Keep the Change illustrates a constructive use of turning neglect to good purposes. As the bank explains:

With the Keep the Change program, you can grow your savings automatically. After your enrollment, we’ll round up all your Bank of America debit card purchases to the nearest dollar amount and transfer the difference from your checking account to your savings account. Every cup of coffee, tank of gas, and bag of groceries you buy adds up to more savings for you. What could be easier?

Keep the Change (which has been criticized on other grounds, including low interest and high fees) does one thing very well: it gets people to save not by trying to curb their impulses to spend but by harnessing these impulses. People do neglect to save, so this program gets them to save while doing what comes most naturally, namely, consuming.

VIGILANCE

For a busy professional, going to the gym with some regularity is much harder than signing up for a gym membership. One reason for this is obvious. The pain of signing up does not compare to the pain of stomach crunches or a half hour on the elliptical machine. But there is another reason. You only need to sign up for the gym once, whereas going regularly requires vigilance—doing the right thing again and again. We can think of choices as coming in one of two varieties: vigilance and one-off. Vigilance choices require that we continuously repeat the choice, like going to the gym, saving for a rainy day, eating the right foods, or spending quality time with our family. Some even require hypervigilance. Miss a visit to the gym and you undo only a tiny bit of your hard work, but skip a dose of certain medications, and things quickly get a lot more serious. Slipping up just once and using your savings to buy a leather jacket can also undo many months of hard work. One-off choices only need to be done once (or at least very infrequently) to get the desired outcome: enroll in automatic bill payment and you are done with worrying about paying bills, buy a washer/dryer and you save a trip to the laundromat for years, enroll in some discount feature with your telephone provider and you take advantage of the savings until further notice.

Especially when you tunnel, it is much easier to do the right thing once than to have to repeat it. Yet so many good behaviors require vigilance: being a good parent, saving money, or eating right. To make matters worse, so many bad behaviors need be done just once to cause the pain: borrowing, taking on an ill-advised commitment, making an unwise purchase. You splurge or take a loan just once, and you have dug yourself a hole for the extended future, a hole that will require vigilance to climb out of.

This suggests a recipe: whenever possible, convert vigilant behaviors into one-time actions. Rather than having to be vigilant every time you grab a snack from the pantry, just be vigilant at the grocery store. Many banal tasks have this structure. Keeping your house clean requires vigilance, or (assuming you can afford it) just set up a maid service once. Paying your bills every month requires vigilance. Setting up automatic bill payment only needs to be done once. Remembering to have sufficient cash for tolls while you drive requires vigilance; signing up for E-ZPass, an automatic form of toll payment, is done once. More broadly, because tunneling induces neglect, converting those things that tend to get neglected into one-time solutions can be very powerful. Spending time with your kids invariably suffers when it depends on your vigilance, but if you sign up for a weekly activity together, that one-time action ensures that you will have a minimum amount of quality time together each week.

The other direction also works. Convert questionable one-time behaviors into the kind that demands vigilance. Some policy makers have proposed “cooling off periods” for car purchases, and similar arrangements may be wise for loans of every variety (money, time, calories, and so forth). Essentially, you are setting up a system that requires you to confirm the decision several times before you actually commit to it. (Imagine that any time you receive a tempting invitation, your e-mail is set up to send the following response: “Thank you. I may be able to do this. I will let you know in a week.”)

Occasionally, you may also want to turn automatic renewals into acts of vigilance. When was the last time you checked if there might now be more affordable car insurance than the one you so meticulously chose years ago? Options change, and some one-off choices may also have been misguided. When we signed up for a movie-rental service, we thought we’d be watching several movies a month and returning them promptly. As it stands, it scares us to think of how much we must be paying per movie. Instead of automatically renewing, it might be wise occasionally to confirm the ongoing wisdom of that old one-off choice.

So what about loans? Should we ban quick loans, one-time choices with potentially bad consequences? In the Family Feud experiment from chapter 5, we saw how removing poor participants’ option to borrow improved overall performance. But, of course, this is where life gets more complicated than the lab. Some loans are bad, but some are good. How do we decide which are which? Even within our own theory, some loans provide needed slack. When your car breaks down and you need cash to fix it, a loan (even an expensive one) may prevent a worse cascade—arriving late to work, risking job loss, and so on. Paradoxically, scarcity increases the chance you’ll need a quick fix, as well as the chance that some such fixes will hurt you.

One insight of the psychology of scarcity is the need to prepare for tunneling and to insulate against neglect: navigate so that bad choices are harder to make in a single moment of tunneling, and arrange it so that good behaviors require little vigilance yet are occasionally reevaluated.

LINKING AND THE TIMING OF DECISIONS

In a world of tunneling and neglect, a lot depends on timing. Some of our biggest mistakes happen when deciding for the future, when things far removed from any tunnel look distant and fuzzy. Things we’d never agree to today (“Too busy today!”), we readily commit to a month from now (“Sure! Calendar looks wide open!”). Our needs today are pressing; those a month away are abstract and unrealized. This, as we have seen, is how we end up overcommitted. It’s how those strapped for cash end up buying items they eventually cannot afford. The washing machine that was so appealing six months ago, when it came with 180 days of no payments, now has become a major weight.

But once we understand the psychology, we can use it for some good. There is no reason that the very same feature—a lack of appreciation of scarcity in the future—cannot be harnessed to help. A willingness to commit to a less scarce future underlies the well-known Save More Tomorrow program, through which people who felt they were not currently able to save agreed to increase their savings deductions whenever their salary increased. There would be no new sacrifices now; only later, in that fuzzy future. The results have been stunning. In one firm, more than 75 percent of those offered the plan chose it over trying to save on their own, and only a minority ever opted back out. By the third pay raise, individuals had more than tripled their savings rates.

What’s particularly clever here is the linkage between something you expect to happen (the salary raise) and something you would like to happen (the increased savings). This arrangement automatically links the two. You can do something similar with borrowing. Consider the following thought experiment. In an attempt to curb predatory lending, one state forces payday lenders to charge lower fees—say, $25 instead of $50 on a $200 loan. Assume the industry remains profitable and survives. In another state, a different program is created: fees remain at $50, but only $25 goes to the lender; the remaining $25 goes into an account in the borrower’s name. Once $200 has been accumulated in this account—in this case, after eight loans—the person no longer needs to borrow. When she needs a loan, she can use these savings instead. In effect, by saving $25 of every $50 they would have paid for fees, the borrowers can quickly become “lenders to themselves.”

Put simply, the truth about all those good decisions you plan to make sometime in the future, when things are easier, is that you probably won’t make them once that future rolls around and things are tough again. So preempt and link wisely. At a moment of focus on the importance of exercise, buy a membership, hire a personal trainer, bet a friend, do what you can for this motivation to linger once you’re tunneled elsewhere. If you’re focused enough on healthy foods while shopping, make sure to fill the pantry with the right stuff, for those times when your mind is no longer food conscious. And when something—a book, a commercial—happens to focus you for a moment on life in old age, take action. Arrange for an automatic deduction into savings; call your lawyer to arrange a meeting to write a will. Otherwise, you’ll plan to do it sometime soon, but you’ll be in another tunnel then.

ECONOMIZE ON BANDWIDTH

Because scarcity taxes bandwidth, a key concern in the management of scarcity is to economize on bandwidth. Just as the busy are concerned with every minute of the day, and the poor focus on money, everybody under scarcity is profoundly influenced by how their bandwidth is distributed and spent.

Bandwidth is about allocating our limited information-processing abilities. In that sense, decisions that demand more information processing have immediate bandwidth implications. Every manager stretched for time values assistants who are good at synthesizing decisions, who can distill choices into their essential components and present them clearly. A subordinate who delivers large amounts of unprocessed data is far less useful. Clear and simple syntheses are a terrific way to economize on cognitive capacity.

Yet we often fail to appreciate this when presenting information. This was illustrated in a study of payday loans conducted by economists Marianne Bertrand and Adair Morse. The researchers divided customers who were about to take a payday loan into two groups. One group was shown a table that listed the annual effective interest rate they would be paying (443 percent) compared to comparable loans (16 percent on a credit card). Another group was presented with similar data, but instead of interest rates, they were shown how many dollars they would pay on the loan if they were to repay in two weeks ($45), one month ($90), and so on, as compared to how many dollars they would pay if the same amount were borrowed on a credit card ($2.50 for two weeks, $5 for a month, and so forth). In other words, similar data were presented in slightly different ways: In one case, interest rate, an abstract measure of something, the precise implications of which may be hard to gauge. In the other, dollars paid, familiar units that you need to take out of your pocket. What Bertrand and Morse found was that far fewer customers took the payday loan when they were shown the cost in dollars. Those who come for payday loans are accustomed to seeing, thinking about, and needing dollars. Interest rates, by contrast, are exotic financial instruments that few of us use in daily life and which require substantial intellectual effort to turn into something more palpable. When your bandwidth is taxed, a concrete sum carries a lot more meaning than some abstract term.

Nutrition labels present a similar problem. They inundate people with a great deal of exotic information. Consumers now get not just calorie information but also information on calories from fat, good fats versus bad fats, essential nutrients (are you getting your omega-3 fatty acids?), percentage daily allowance of several vitamins and minerals, and so on. All this makes for serious information-processing demand, and without an easy way to process the information, it’s hard to know how to act. How bad is a bagel? It is hard to tell.

Simply making trade-offs can be taxing. Picture yourself with a lot of work to get done. A good friend is leaving town and there is a going-away party that you really should attend, despite all the work. You decide to squeeze it in by going but not for very long. You will decide how long to stay when you get there, depending on the atmosphere and on what feels right. You arrive at the party, and after an hour you start wondering, “Should I go?” The party is fun and your departure could be misinterpreted, but work calls. Is an hour enough time? Will you look rude? You vacillate. You stay a bit longer, but really your mind is no longer at the party. The trade-off—what you are giving up for being at the party—makes it hard to be truly present. You thought you were helping yourself by remaining flexible, but what that really meant is giving way to lingering and distracting trade-offs.

The busy are desperate for time to devote to family and friends. Squeezing this time into a busy schedule is challenging—it ends up a predictable victim of neglect—and even when it is squeezed in, the pleasure is often gone, while the mind is elsewhere, contemplating what could be done instead. One of the wisest interventions we know of for dealing with scarcity’s trade-offs is the Jewish Sabbath. The Sabbath is an old concept. You do not work on the Sabbath, or e-mail, or write, or cook, or even drive. It is a day of tranquility, serenity, rejuvenation of the kind that many of us might not experience for years. And it’s ingenious for at least two reasons. One is that there are no options, no dilemmas; it’s a day of nothing but time off, no trade-offs. And the other is that it happens at the same time every week, right when Friday exits, no matter how busy you might be, no questions asked, no need to plan. The Judaic scholar Abraham Joshua Heschel wrote a book about the Sabbath, which he considered God’s gift of time.

The Atkins diet is reminiscent of the Jewish Sabbath. Most diets encourage trade-offs. They allot a certain number of calories, a certain number of grams of carbs, and other assorted constraints. Dieters are then asked to pick the mix of foods that they prefer, while satisfying the overall restrictions. It gives them the “flexibility” to contemplate their own preferences. But, like the partygoer above, this only condemns the bandwidth-taxed dieter to prolonged bouts of trade-off thinking. And trade-off thinking is both distracting and particularly bad for dieting since focusing on food makes it harder to resist. One study randomly assigned participants to diets that differed in their rule complexity and concluded, “Perceived rule complexity was the strongest factor associated with increased risk of quitting the cognitively demanding weight management program.”

The Atkins diet (in its many incarnations) helps resolve this problem. Instead of constant trade-offs, it imposes a very small budget for carbohydrates. This makes some choices quite easy: some foods are so low in carbs that you can eat them without trade-offs. It makes other choices—a very big dessert—a virtual impossibility because they simply have too many carbohydrates. This leaves some room for trade-offs—a small dessert or a few slices of bread—but far less than in a standard diet. Now, there are those who are not convinced the Atkins diet is particularly good for you. But psychologically, it has one distinct advantage. Instead of having to ration your caloric intake and calculate at every meal what you would do, the Atkins diet is closer to the Sabbath, with its simple prohibitions and very few trade-offs.

BANDWIDTH VARIES

Another important thing about bandwidth is that it doesn’t remain constant over time. Recall the sugar cane farmers we studied in chapter 2. Right before harvest they were poorer and right after harvest they were richer. But more important, right before harvest they had less bandwidth and right after harvest they had more. In a similar way, because of the failure to smooth their consumption, low-income workers who are paid monthly, as well as food stamps recipients, will likely have the least bandwidth near the end of the month and more bandwidth right at the beginning. And it would be wise to exploit this timing in implementing policy and program design. If you had a program trying to teach almost anything where some bandwidth is required, from health practices to business accounting, when would it be most effective? Right before or right after harvest, if you are teaching farmers? Right before Christmas, when the poor are scraping together money for gifts, or right after? Once you understand the bandwidth timeline, you can mark the calendar for those weeks in which you will find people listening and absorbing and those in which you’ll encounter mind wandering.

The importance of timing bandwidth is that it also allows you to link events to better bandwidth moments, as illustrated by the following telling study. Fertilizer has been shown to have high economic returns for farmers—over 75 percent, for example, for maize farmers in Kenya. And yet many Kenyan farmers do not use it. The problem does not appear to be a lack of knowledge; most farmers report that they plan to buy fertilizer, yet fewer than a third actually do. They often cite that they have run out of money. What they really mean is that they did not have the money when they needed it. They get paid right after harvest, and the fertilizer needs to be purchased many months later, at a time when they are cash-poor and bandwidth taxed.

To bridge the gap between when there’s money and when fertilizer is needed, some researchers created a simple and clever intervention. They had the farmers prepurchase the fertilizer, buying it during harvest, when they were flush with cash, for delivery at planting time. With this simple change, the percentage of Kenyan farmers who bought and used fertilizer rose to 45 percent from 29 percent—a dramatic increase. Failure was averted by relocating an important decision from a time when the farmers were cash-poor and, more important, bandwidth-poor to a time when they were cash-rich and bandwidth-rich.

Being aware of the natural variation in bandwidth can also help those with busy lives. The busy often schedule their activities based on time available—a task requires a certain amount of time, and I have that kind of time right here, Wednesday at 11 a.m. But beyond time, tasks also use bandwidth, some more, some less. Monitoring a conference call to make sure all goes as planned requires a lot less bandwidth than a tense in-person meeting with a boss or a client. Yet we often focus on available time slots without this recognition. Clearly, our bandwidth varies throughout the day. Are we allocating our tasks wisely, ensuring that high-bandwidth tasks get assigned high-bandwidth slots?

Exploiting bandwidth might include not only timing tasks and events but also setting the best order. For the longest time, as we struggled to write this book, we would put aside a block of time every morning. And we protected it ferociously, sometimes even when it was painful to do so—for example, when you’re the only one holding up the scheduling of a six-person meeting. We were not simply protecting time; we were protecting high-bandwidth time. But this did not work very well; our writing sessions were not particularly effective. And then we realized what we had done wrong. Before sitting down for our ferociously protected writing time, we quickly looked over e-mail, to take care of any urgent business before we withdrew. By nine o’clock we would force ourselves to quit even if sometimes this required extreme action, like turning off the wireless router! But, as it turned out, we hadn’t fully quit. One message about a delayed project highlighted how seriously behind we really were. Another would remind us about the urgent need to raise some money. We weren’t sitting down to write so quietly. We had begun a series of mental, and noisy, trains of thought. We had acted like dieters exposing themselves to donuts every morning just before sitting down to think about other things.

SNAGS

Many low-income high school graduates do not go to college. And many generous financial aid programs, driven by the assumption that the reason is a lack of money, are geared toward helping low-income individuals. Yet these programs are severely underutilized; few applicants show up. This is surprising, so a group of researchers set out to find out why. They divided eligible high school graduates (and their families), who had come for help with their tax filing, into three groups and gave them all the forms needed to apply for financial aid to college. For the first group, they simply observed the tendency to apply. For the second, they tried to bridge the information gap. Perhaps eligible high school graduates didn’t know about the money they were eligible for, so the tax professionals told them. For the third group, the researchers did something inspired. Tax professionals not only told the eligible graduates what they were eligible for, but they also actually filled out the forms with them. Simply telling people the exact benefits they were eligible for had no noticeable effect. But the help filling out the forms did have a remarkable effect: not only were they more likely to apply for financial aid, they were also 29 percent more likely to enroll in college.

Having to fill out forms is a potential snag for anyone, a chance to procrastinate and to forget. But with their bandwidth taxed, and with perhaps a bit of stigma attached, it is a bigger snag for low-income people. Families with no college experience tripled their submission rate if they received help in filling out the forms.

There is a deeper insight here about how to manage scarcity. Misplanning, procrastination, and forgetting can turn seemingly minor steps into major stumbling blocks. Yet we overlook these snags when structuring our lives or crafting policies for others. Give someone a form to take home and she may forget it; have her fill it out on site and enrollment goes way up. Of course, filling out a form is a “minor” step, but it is also one that is too easy to stumble on, like having to compute interest or remembering to renew the registration. When our bandwidth is taxed, the simplest snags can do a lot of damage.

Those on public benefits, for example, often are required to “recertify”—to complete a series of forms—every year to show that they are still eligible. As you might imagine, it is during these periods of recertification that people drop out of the program. And this requirement appears often to screen out the most needy: those who are most taxed are also those most likely to delay in recertifying and, unfortunately, the ones in greatest need of the benefit.

To see the logic of taxing bandwidth, think about it this way. Imagine we imposed a hefty financial charge to filling out applications for financial aid. We would quickly realize that this is a silly fee to impose; a program aimed at the cash stretched should not charge them much cash. Yet we frequently design programs aimed at people who are bandwidth-stretched that charge a lot in bandwidth. To use another vivid metaphor, it’s like going to a juggler who is in need of help and tossing one more ball in the air for him to juggle.

This, incidentally, is not an argument for removing all snags. Sometimes there is a reason for their existence. Financial aid forms are complex because a lot of information is needed. Recertification happens because circumstances change, and programs need to target those who are eligible. But there are alternatives: for one, many forms could be automatically filled using tax data. The mistake we make in managing scarcity is that we focus on one side of the calculus—removing snags can be costly—while we underestimate the other—the bandwidth tax. But the data suggest that this tax can be unreasonably large. Small snags can be the difference between a successful program and an unsuccessful program, between receiving benefits or not, between being and not being a college graduate.

THE PROBLEM OF ABUNDANCE

As we contemplate the better management of scarcity, we should remember that scarcity often begins with abundance. The crunch just before a deadline often originates with ample time used ineffectively in the weeks preceding it. The months just before harvest are particularly cash tight because money was not spent well in the easy months following last harvest.

Remember the study from chapter 1, where participants did better at proofreading essays when they were given tighter deadlines? Although most people realize that deadlines can help them work better, deadlines are often underappreciated. In another version of that experiment, some participants were allowed to choose their own binding deadlines. The option to pick a deadline helped: participants voluntarily imposed strict deadlines that helped them earn more than the no-deadline group. But their freely chosen deadlines were not as aggressive as they should have been. They earned 25 percent less than the group that had no choice, whose deadlines were imposed on them. We have seen this with our own students. In one of our classes, we let students pick their deadlines for the final paper. Some wisely chose deadlines much earlier than the end of the semester. But many did not, causing themselves to cram for this paper right when all their other papers were due.

In a world of scarcity, long deadlines are a recipe for trouble. Early abundance encourages waste, and by the time the deadline approaches, tunneling and neglect settle in. Breaking a long deadline into progressively earlier chunks can cut this arc. The same thing happens with money. A farmer paid in one lump sum is being set up on a similar cycle of early abundance followed by eventual scarcity. And as with time, dividing a payment into incremental pieces can help. What if the farmer were to get paid not in one lump sum but more regularly? The same is true of food stamps. Recall that food stamps recipients were not able to smooth out their income over the month. Lots of bandwidth must now be used to plan, remember, control, and make trade-offs. Why not pay the benefits weekly? Or, if needed, some combination: a large initial payment to take care of big monthly expenses and then smaller payments for week-to-week expenses. A way to fight the abundance-then-scarcity cycle is to even it out—to create long periods of moderation rather than spurts of abundance followed by heightened periods of scarcity.

THE NEED FOR SLACK

The reason why the abundance-then-scarcity cycle is so bad is that, as we have seen, scarcity can get us trapped. It is not merely that we fail to smooth our activities under abundance; it is that we fail to leave slack for the future. We saw with the Koyambedu vendors in chapter 6 what having too little slack can do. When hit with a shock, they got themselves right back into a debt trap, one that could have been avoided given earlier abundance. This is the danger of not leaving enough slack, not enough buffer for potential shocks. It is not merely that the shocks hurt us but that they put us in a position for the psychology of scarcity to kick in. We begin to tunnel and to borrow, and soon we are one step behind and perpetually playing catch-up.

Yet despite this, it is striking how often we fail to build a buffer stock. While direct research on this question is scant, there are some good hints. For one, the data suggest that we tend to underappreciate the likelihood of many low-probability events. That’s why we underinsure for floods and earthquakes. When everything is going smoothly, we can, of course, imagine dark clouds, but we undervalue their possibility and thus do not prepare properly. And it’s a lot worse when any of many possible shocks can trip us. Technically, we are facing a disjunction of low-probability events. What could interfere with your plans are not just floods or earthquakes, but you may get sick, or a family member could get sick, or there could be a break-in, or a car theft, or a war, or the loss of a job, or a surprise wedding, or an unexpected birth. All of these, of course, are possible but highly unlikely. But the problem is that any one of these is enough to count as a shock, for which you should have built some buffer stock.

And that buffer stock needs to be built during times of abundance. If time is where you expect scarcity, this means leaving some extra room in your schedule, for “no good reason,” other than being able to move your many projects and obligations around at no cost. With money, it means having and building a rainy day account, even if you do not feel terribly flush. All this does not come easy, does not feel natural, because even when you know that shocks and scarcity can happen, it doesn’t feel that way when there’s abundance.

The tug of scarcity can be strong. But understanding its logic can minimize its negative consequences. We can go some way toward “scarcity proofing” our environment. Like investing in a smoke alarm or setting up a college savings account for your new baby, a singular moment of insight can have lasting benefits.