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> Posted by Sonja E. Kelly, Fellow, CFI

The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

Since Sendhil Mullainathan is speaking at our Financial Inclusion 2020 Global Forum in two weeks, we ordered a few copies of his new book with Eldar Shafir to pass around the office. As a result, the hypotheses of Scarcity are informing our thinking both on our own habits and on financial inclusion.

The title of the session in which Mullainathan, a Professor of Economics at Harvard University, is speaking is “Why Financial Inclusion Means More Than We Ever Knew.” A mouthful, yes, and a bit mysterious. To unravel the mystery, one has to start with Mullainathan’s hypothesis that scarcity of some kind of resource—money, time, even social relationships—brings about an intense focus on the scarce resource, a focus that has negative effects on the way we think and act in areas of our lives outside that of the scarce resource. If this is true, financial inclusion is a game-changer that both prevents scarcity and alleviates its effects.

On first reading, Mullainathan and Shafir’s book seems to apply immediately to my own life. In my case, a scarcity of time means that I often adopt a focus on time and resulting tunnel vision for the task at hand. This focus has some positive effects—I produce work much faster than I would if I had more time. And it has some negative effects—I forget special events like my closest friend’s birthday (I’m sorry, Sarah! Does mentioning you in this blog post make up for it?). In essence, the authors contend that the single-minded focus that severe scarcity creates absorbs so much psychic energy, mindspace, bandwith, or whatever you may call it, that rational decision-making suffers.

This tunneling—devoting a great deal of bandwidth to a single resource—produces intense focus on the scarce resource, but also catastrophic failure on the things that get neglected to make “space” for such a focus.

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