Scarcity: Why Having Too Little Means So Much

Chapter 6 delves into the concept of “scarcity traps,” a vicious cycle in which scarcity-induced behaviors perpetuate and often exacerbate one’s state of scarcity. Through real-world examples and empirical studies, Mullainathan and Shafir illustrate how scarcity traps operate and why breaking free from them is challenging yet critical.

The chapter begins with a case study from Koyambedu Market in Chennai, India, where the typical street vendor, despite the potential to double their income by escaping debt, remains trapped in borrowing cycles due to high-interest rates. This scenario serves as a springboard to discuss how scarcity creates behavioral patterns that reinforce one’s scarcity, effectively trapping individuals in a cycle of perpetual shortage.

Mullainathan and Shafir explain that scarcity traps are defined not just by a physical lack of resources but by the ineffective use and management of those resources. Individuals caught in scarcity traps find themselves constantly behind, allocating much of their income or time to addressing immediate needs or debts, which prevents them from engaging in more productive activities.

The authors introduce “juggling” as a key behavior in scarcity traps. When individuals juggle, they continuously shift focus among immediate pressing tasks, treating predictable events as emergencies. This