marginal utility is increasing amid scarcity

Couched in economic terms, this is the recognition that the further away you are from having enough of something, the less incentive you have to get incrementally more of it. Since learning of this concept from Charles Karelis’ The Persistence of Poverty I’ve found applications of it everywhere, including in my own life.

In Economics

Traditional economic wisdom holds that marginal utility (the value you get from more of something) is always decreasing. This is essentially the law of diminishing returns, and holds true in conditions of abundance, e.g. when all your needs are met and you have the luxury of indulging in a cookie, you’ll derive more pleasure from the first cookie than the tenth—the value you get from each additional cookie is decreasing. (That economists tend to come from backgrounds of abundance may explain why they often believe this principle universal.) But imagine yourself in conditions of scarcity. You’ve got a lot of painful problems: hungry kids, creditors demanding payment, medical problems you can’t afford to fix, exhaustion, neighborhood crime, etc. As a result:

• Solving any single problem brings little to no comfort, since all the others remain. As a result, there is little incentive to further exhaust yourself chasing a slightly higher income.
• There is significant incentive to pursue fleeting pleasures, even though they’re unproductive, since material improvement to your conditions seems so far out of reach
• There is a greater incentive to take risks, even bad ones, because a small chance of all your problems going away is surer path to happiness than playing it safe and keeping your family in poverty.

Conditions of scarcity comprise a balancing feedback loop that traps people in poverty. So what’s the solution? As Karelis argues and research backs up, the most reliable way to alleviate poverty is to give people money. Removing some of the scarcity from peoples’ lives increases the marginal utility of removing the rest of it, a reinforcing feedback loop that just needs a kick start. It’s disheartening that reducing inequality seems to be the last thing our society is willing to try, but I’m encouraged to see policies like universal basic income and organizations like GiveDirectly getting traction, thanks in no small part to the philosophy of effective altruism inspired by the work of moral philosopher Peter Singer.

In My Life

While I’ve never experienced the kind of economic scarcity about which Karelis writes, I’ve found applications of this idea in my own life. In December of 2019 my second child was born, leading to a scarcity of sleep, energy, and especially time in my life. A few months later, the COVID-19 pandemic hit, imposing a scarcity of social interaction, exercise, and even moreso time due to daycare closing frequently and unpredictably. When I have found snippets of time, I’ve found myself drinking or playing video games instead of catching up on chores or personal projects like writing. How irrationally unproductive, right? But marginal utility increasing amid scarcity explains why: when I have too little free time outside of work and childcare to clean the whole house or write an essay, the value of making incremental progress on any such goal is quite low. And the value of fleeting pleasure that make me feel less bad about not attaining those goals is proportionally higher.

What I needed was a kick-start to lift me partially out of these conditions of time-scarcity, but I couldn’t see that. On the contrary, I barely had time to keep up at work, so taking time off for myself seemed extravagant and unrealistic. It wasn’t until a year and a half later in July 2021 that my employer instituted “Summer Break,” a mandatory week off for all employees, that I finally had time to catch my breath, and realize just how much I’d been suffocating.

Elsewhere

A good friend (and fellow note.gardener) has been thinking a lot about what he calls “the empty tank” (i.e. scarcity of energy, motivation, etc.) and the ways that an empty tank, especially one left empty for a while, can shape how we look at and experience the world. He comes to a similar conclusion that you can’t just “try harder” to drive on an empty tank; you have to change the systems you’re a part of (your environment) to change the level in your tank:

Mind your tank. If it is empty fill it up. If you can’t seem to fill it up in your current environment, I beg you to reconsider your environment.

This remind me a lot about the systems thinking approach to modeling systems as stocks and flows, and how the outward behavior of a system (including oneself!) can often be understood and explained by its internal levels (stocks) of the resources on which it depends. If a low stock is causing some behavior you’d rather change, you have to look at what’s flowing into and out of that stock causing the low level and change those.