SHOP TALK: Eldar Shafir on the effects scarcity –

Memorial Day weekend followed by Princeton University reunions and graduation is a time when most Princeton residents rarely think about scarcity. Generally, the conversation under tents and in backyards is filled with groans about too much food, too much drink, too many people, too many cars, and too much stuff loaded into those cars.

On the weekend of June 10, however, several Princetonians are going to be thinking a lot about scarcity, thanks to Princeton University Professor Eldar Shafir. Dr. Shafir who is speaking at a Housing Initiatives of Princeton Garden Party benefit June 10 is internationally renowned, along with his co-author Dr. Sendhil Mullainathan from Harvard University, for the 2013 book "Scarcity: Why Having Too Little Means So Much."

As a behavioral scientist whose main area of interest is behavioral economics and decision-making, Shafir will talk about the thesis of his book the scarcity vicious cycle and relate it to the mission of HIP. Individuals with a scarcity of funds fail to make smart decisions concerning their finances for a variety of cognitive reasons, including the lack of supportive resources, thus their lives spiral downward. It turns out that the work done by HIP could be a case study for Shafirs academic work.

Since 2004, the Housing Initiatives of Princeton has been helping to break that downward spiral for dozens of people by offering a holistic menu of services to those in dire financial circumstances. It is dedicated to transitioning low-income working families and individuals who are homeless or facing imminent homelessness to permanent housing and sustained self-sufficiency.

The charitable non-profit does far more than place a temporary roof over ones head. The organization becomes a supportive resource for clients by providing individualized case management services to enhance life skills needed to attain self-sufficiency and permanent housing and ultimately to succeed independently.

Most in Princeton have a comfortable life," Shafir said. "We can afford to hire accountants, investment brokers, mortgage brokers, psychologists, attorneys to help make smart decisions about our well being. But there are those who are struggling with a scarcity of funds and do not have the support systems. The problems associated with poverty consume mental energy and capacity. Those struggling financially often make decisions that perpetuate and exacerbate poverty."

The concept of scarcity and smart decision-making applies to more than financial decisions, and thus everyone can relate to the premise of the book, regardless of his or her economic situation, noted HIP Interim Board Chair Carol Golden. The authors research and conclusions describe how scarcity creates a similar psychology for everyone struggling to manage with less than they need. Busy people fail to manage their time efficiently for the same reasons the poor and those maxed out on credit cards fail to manage their money. The dynamics of scarcity reveal why dieters find it hard to resist temptation, why students and busy executives mismanage their time.

The book is so significant, in my opinion, because it gives individuals who have no financial problems a real understanding as to why it is extremely difficult for people with great financial challenges to change their lives unless they have access to outside help, said Golden, a Princeton resident and attorney who volunteers her services as the full-time chair of the organization, officially known as Housing Initiatives of Princeton Charitable Trust.

Shafir further elaborated on his thesis in a research paper, Poverty Impedes Cognitive Function, published in the August 2013 issue of Science (written with Anandi Mani and Jiaying Zhao).

According to the papers summary, the poor often behave in less capable ways, which can further perpetuate poverty.

We hypothesize that poverty directly impedes cognitive function and present two studies that test this hypothesis," the authors wrote. "First, we experimentally induced thoughts about finances and found that this reduces cognitive performance among poor but not in well-off participants. Second, we examined the cognitive function of farmers over the planting cycle. We found that the same farmer shows diminished cognitive performance before harvest, when poor, as compared with after harvest, when rich.

"This cannot be explained by differences in time available, nutrition, or work effort. Nor can it be explained with stress: Although farmers do show more stress before harvest, that does not account for diminished cognitive performance. Instead, it appears that poverty itself reduces cognitive capacity. We suggest that this is because poverty-related concerns consume mental resources, leaving less for other tasks. These data provide a previously unexamined perspective and help explain a spectrum of behaviors among the poor.

As Princeton University Professor of Behavioral Science and Public Policy, Shafir, who has been working at the university for the past 25 years, also serves as the director (its inaugural director) of Princetons Kahneman-Treisman Center for Behavioral Science and Public Policy, and co-founder and scientific director at ideas42, a social science research and development lab.

A $10 million anonymous gift created theCenter for Behavioral Science and Public Policy at Princeton, enabling the university to strengthen its leading role in this emerging field and improve the development of effective policymaking. The donor, a Princeton University parent, was a longtime admirer of the work of Dr. Daniel Kahneman, a Nobel laureate, and a Princeton University professor of psychology and public affairs emeritus, and Dr. Anne Treisman, a Princeton University professor of psychology emerita.

The center is building on the research that earned Kahneman the Nobel Prize in economic sciences in 2002. The award-winning work integrated insights from psychological research into economics, particularly concerning decision making under uncertainty.

In the traditional view, policies are designed for people who make rational decisions based on thorough consideration of the options and on well-informed cost-benefit analyses," the university stated in a release announcing the gift in 2015. "In the approach pioneered at Princeton, policies are developed with a focus on what really drives people in decision making the idiosyncratic and sometimes surprising ways in which they view their choices, perceive the social, economic and political world around them, and decide whether or not, and how, to act. Why do some people spend too much and save too little, choose unhealthy diets that might shorten their lives?"

Princeton University President Christopher Eisgruber said:

This generous gift will allow us to deepen and expand our efforts in an extremely promising area of teaching and research. . . . Princetons faculty members are applying behavioral science techniques to topics that include law, economics, health care, household finance and dispute resolution, Princeton University President Christopher Eisgruber said. "We expect that the research conducted at the center will directly influence local, national and global public policy, identifying new approaches to address social problems and improve lives.

And HIP clients and supporters offer an abundance, not scarcity, of thanks for the academic work and research that will help HIP serve the community in the most effective manner possible.

The Housing Initiatives of Princeton will host its annual Garden Party, June 10, beginning at 4 p.m. at a private residence in Princeton. Admission costs $95 and features Shafir's talk, cocktails and light fare. To register, go

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SHOP TALK: Eldar Shafir on the effects scarcity -

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