Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

A scarcity of guesses in both games meant they could not neglect either one, whereas abundance in one game led them to neglect that game in favor of the one they felt poor on.

We will call these negative consequences the tunneling tax. Naturally, whether this tax dominates the focus dividend is a matter of context and of payoffs.

Rather, what the study shows is that cost-benefit considerations do not determine whether we tunnel. Scarcity captures our minds automatically. And when it does, we do not make trade-offs using a careful cost-benefit calculus. We tunnel on managing scarcity both to our benefit and to our detriment.

Insurance does not deal with any of the needs—food, rent, school fees—that are pressing against the mind right now. Instead, it exacerbates them—one more strain on an already strained budget.

Sometimes when we tunnel, we neglect other things completely. When we are busy with a pressing project, we skimp on time with our family, put off getting our finances in order, or defer a regular medical checkup. When you are extremely rushed for time, it is easier to say, “I can spend time with the kids next week,” rather than, “Actually, the kids really need me.

When exactly will I really have time next?” Things outside the tunnel are harder to see clearly, easier to undervalue, and more likely to get left out.

What we can say is that the benefits of marketing look a lot like the kind of thing you would neglect in the tunnel, when you are focused on trimming your budget this quarter. Marketing—like the insurance policy—has a cost that falls inside the tunnel while its benefits fall outside.

But by exposing how tunneling operates, how some considerations are often ignored, the scarcity mind-set can shed light on the issue even without settling these debates.

Immediate scarcity looms large, and important things unrelated to it will be neglected.

Scarcity alters how we look at things; it makes us choose differently. This creates benefits: we are more effective in the moment. But it also comes at a cost: our single-mindedness leads us to neglect things we actually value.

When the day arrives, he tries to focus, but his mind keeps going elsewhere. He misses some easy questions and is doubly upset at the end of the day. Not only is he struggling with tuition; he is annoyed at his abysmal performance on the exam.

Trying to focus on making ends meet right now, we fail to consider the impact in the future of raising the insurance deductible.

We catch the harried executive not when she is putting together her sales pitch but when she is a parent. We catch the student not when he is dealing with making ends meet but when he is trying to focus on his exam. We catch the low-income worker not when she is at home managing her finances but when she is at work serving food.

These anecdotes illustrate a central hypothesis: because the focus on scarcity is involuntary, and because it captures our attention, it impedes our ability to focus on other things.

Scarcity in one walk of life means we have less attention, less mind, in the rest of life.

The concept of less mind is well studied by psychologists. Though careful research in psychology employs several fine distinctions to capture this idea, we will use the single umbrella term bandwidth to cover them all.

This chapter makes a bold claim. By constantly drawing us back into the tunnel, scarcity taxes our bandwidth and, as a result, inhibits our most fundamental capacities.

level. A whole host of subsequent studies have shown that noise can hurt concentration and performance. Even if the impact of noise does not surprise you, the size of the impact (a full school year level at sixth grade) should. In fact, these results mirror many laboratory studies that have documented the powerful effects of even slight distraction.

Now picture yourself working in a pleasant, quiet office: no disruptions, no trains. Instead, you are struggling with your mortgage and the fact that freelance work is hard to come by. Your spouse and you are living a two-earner life with only one and a quarter earners. You sit down to focus on your work. Soon your mind is wandering. Should we sell the second car? Should we take another loan? Suddenly, that quiet office is not so quiet anymore. These noisy trains of thought are every bit as hard to ignore. They arrive at even greater regularity and are every bit as uninvited.

You can ride these trains of thought for some time before you break free and return to focusing on your task.

This is how scarcity taxes bandwidth. The things that distract us, that occupy our mind, need not come from outside us. We often generate them for ourselves, and these distractions can disrupt our attention more than a physical train.

The persistent concern pulls at the mind, drawing us in. Just like an external noise that distracts us from thinking clearly, scarcity generates internal disruption.

A great many studies have documented the profound impact of internal thoughts—even something as trivial as rehearsing a sequence of numbers in your head—on general cognitive function.

One common distinction is between “top-down” processing, where the mind is directed by our conscious choice of what to focus on, and “bottom-up” processing, where attention is captured by one stimulus or another in ways that we find hard to control.

doing. A particularly noteworthy form of distraction, one that requires no external distractors at all, is mind wandering. Without our realizing it, the brain’s resting state—the default network—tends to pull us away from what we are doing.

Behavioral and neuroimaging studies have shown that distraction along with brain activity related to the presence of distractors increase when the load is high. Top-down attention cannot prevent bottom-up intrusions.

Scarcity itself also captures attention via a bottom-up process. This is what we mean when we say it is involuntary, happening below conscious control.

As a result, scarcity, too—like trains or sudden noises—can pull us away even when we are trying to focus elsewhere.

Of course the dieters were not physically blinded; they were just mentally distracted. Psychologists call this an attentional blink.

The food picture, now gone, had made them mentally blink.

Dieters took 30 percent longer to find CLOUD after they had just searched for DONUT. Dieters were not slow overall—they found CLOUD just as quickly as nondieters when it was preceded by PICTURE. The DONUT was the problem.

What is happening here is clear. It is a version of what

psychologists call proactive i...

You are against a tight project deadline but must attend an unrelated meeting. How much of this meeting will you process? Sitting at the meeting you try to focus, but despite your best efforts, your mind keeps wandering back to that deadline.

These background programs are eating up processor cycles. Your browser is limping along because it has less computing power to work with.

This leads us to the central hypothesis of this chapter: scarcity directly reduces bandwidth—not a person’s inherent capacity but how much of that capacity is currently available for

we will continue to use the blanket term bandwidth to refer to two broad and related components of mental function, which we will now explain in greater depth.

The first might be broadly referred to as cognitive capacity, the psychological mechanisms that underlie our ability to solve problems, retain information, engage in logical reasoning, and so on.

Perhaps the most prominent in this category is fluid intelligence, the ability to think and reason abstractly and solve problems independent of any specific learning or experience. The second is executive control, which underlies our ability to manage our cognitive activities, including plan...

A central feature of cognitive capacity

is fluid intelligence.

we use the most prominent and universally accepted measure of fluid intelligence, the Raven’s...

and ask yourself which of options 1–8 fits in the missing space:

It is the most common way that psychologists, educators, the military, and others measure what is called fluid intelligence, the capacity to think logically, analyze and solve novel problems, independent of background knowledge.

How will I make the minimum payment this month? Can I afford to miss another payment? Should I take a payday loan this time instead? A little tickle could raise a racket in the brain. And this racket affected performance. The well-off subjects, with

no racket, did just as well here as if they had seen the easy scenario. The poorer subjects, on the other hand, did significantly worse. A small tickle of scarcity and all of a sudden they looked significantly less intelligent. Preoccupied by scarcity, they had lower fluid intelligence scores.

Because the Raven’s test is used to measure fluid intelligence, it has a direct analogue with IQ.

Remember: these differences are not between poor people and rich people. Rather, we are comparing how the same person performs under different circumstances.

The same person has fewer IQ points when she is preoccupied by scarcity than when she is not.

Just like the processor that is slowed down by too many applications, the poor here appear worse because some of their bandwidth is being used elsewhere.