The Yin and Yang of Scarcity

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If necessity forces us to be inventive, then scarcity forces us to be efficient, right? Yes, scarcity can do that, but it also causes us to do some other things that aren’t so good, according to Sendhil Mullainathan and Eldar Shafir, the authors of Scarcity: The New Science of Having Less and How it Defines Our Lives (2013). Scarcity is as much about psychology as it is about economics. (Mullainathan is a Harvard economics professor, Shafir is a Princeton psychology and public affairs professor, and both conduct research in behavioral economics.) “Scarcity captures the mind” as “the mind orients automatically, powerfully, toward unfulfilled needs,” they wrote.


Lacking time, money, and other resources to fulfill all of our needs affects our thinking, for better and for worse. In capturing our minds, scarcity “focuses our attention on using what we have most effectively,” generating a “focus dividend.” But this dividend comes with a hidden, cognitive price tag. “The power to focus is also the power to shut things out.  Instead of saying that scarcity ‘focuses,’ we could just as easily say that scarcity causes us to tunnel: to focus single-mindedly on managing the scarcity at hand.” Consequently, “focusing on something that matters to you makes you less able to think about other things you care about.”


For example, many small businesses quickly cut their marketing budgets when times are tough. The sharp focus on the bottom line blocks out other important considerations. According to a business adviser the authors quoted, “lean times are exactly the times your small business most needs marketing.” Why? Because “consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and services and choose them rather than others by getting your name out there.”


Can the same be said about policy makers trying to balance a budget? A recent OLR report on the steps California, Massachusetts, New York, and Rhode Island took to address 2008 budget deficits cited policy analysts who claimed that prior tax and spending policies, coupled with long-term structural change, made them especially vulnerable to recessions and undermined their ability to become fiscally solvent when the economy recovered.

New Report: Regulation Adoption Process

OLR Report 2015-R-0064 describes the process that agencies in Connecticut must follow when adopting “mandatory regulations.”

The regulation-adoption process is governed by the Uniform Administrative Procedure Act (UAPA) and generally includes (1) notice by the agency of its intent to adopt regulations, (2) review of the proposed regulation by the attorney general for legal sufficiency, (3) submission by the agency of the proposed regulation to the Regulation Review Committee for approval, and (4) submission by the agency of the committee-approved regulation to the secretary of the state for posting on the eRegulations System. The UAPA establishes procedural requirements and deadlines (some of which the committee may extend) for each stage of the process. It also requires agencies to (1) analyze a proposed regulation’s impact on small businesses in Connecticut and (2) maintain an official regulation-making record (CGS §§ 4-166 to 4-176).


For more information, read the full report.

Study Links Energy Drinks and Adolescent Hyperactivity

Researchers at Yale’s School of Public Health recently published a study that found, perhaps not surprisingly, a strong correlation between the amount of heavily sweetened beverages adolescents consume and their risk for symptoms of hyperactivity and inattention.

The researchers interviewed 1649 middle school students and found (1) that the risk of hyperactivity and inattention increased by 14% for every sweetened beverage the student consumed and (2) students who reported consuming energy drinks, which typically contain both sugar and caffeine, were 66% more likely to display hyperactivity and inattention symptoms.
  
According to the lead researcher, Prof. Jeannette Ickovics, “Our results support the American Academy of Pediatrics recommendation that parents should limit consumption of sweetened beverages and that children should not consume any energy drinks.”


Click here to read the full study in Academic Pediatrics (subscription required).

New Report: Veterans' Property Tax Exemptions

OLR Report 2015-R-0011 provides an overview of Connecticut’s veterans’ property tax exemptions.

The law requires municipalities to give wartime veterans and their surviving spouses certain property tax exemptions, commonly referred to as state-mandated exemptions. With their legislative bodies' approval, municipalities may grant an additional exemption, commonly referred to as a local-option exemption.  The exemption amount is a reduction in the property's assessed value on which taxes are owed, not a credit against the amount of the tax.

Additionally, the law requires municipalities to increase state-mandated and local-option exemptions if a revaluation done on and after October 1, 1990 results in a grant list increase (CGS § 12-62g). 

Veterans rated by the U.S. Veterans Administration (VA) as having a disability are eligible for property tax exemptions over and above those available to other veterans, provided they meet specified criteria. The exemption amount depends on the severity of the disability and other factors, including the veteran's income.

Veterans’ exemptions are not automatic.  By law, eligible claimants must apply for them and provide proof of eligibility.


For more information, read the full report.

Student Loan Delinquency Rate Continues to Climb

Since the Great Recession, 90+ day delinquency rates for most forms of household debt (e.g., credit card debt and auto loans) have declined, according to a recent report by the New York Fed. The exception to this trend is student loan debt, for which the 90+ day delinquency rate has steadily increased since 2003 and reached 11.3% in the fourth quarter of 2014. As the New York Fed notes, student loans now have the highest delinquency rate of any form of household credit.


The New York Fed also notes that student loans are now the largest category of household debt other than mortgages. Student loan debt now stands at approximately $1.2 trillion, more than triple the amount from 2004. As recently as 2009, student loans were the smallest category of nonmortgage debt.