Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

Scarcity captures the mind. Just as the starving subjects had food on their mind, when we experience scarcity of any kind, we become absorbed by it. The mind orients automatically, powerfully, toward unfulfilled needs. For the hungry, that need is food. For the busy it might be a project that needs to be finished. For the cash-strapped it might be this month’s rent payment; for the lonely, a lack of companionship. Scarcity is more than just the displeasure of having very little. It changes how we think. It imposes itself on our minds.

When scarcity captures the mind, we become more attentive and efficient.

We can directly measure mental capacity or, as we call it, bandwidth. We can measure fluid intelligence, a key resource that affects how we process information and make decisions. We can measure executive control, a key resource that affects how impulsively we behave. And we find that scarcity reduces all these components of bandwidth—it makes us less insightful, less forward-thinking, less controlled.

bandwidth. There is one particularly important consequence: it further perpetuates scarcity. It was not a coincidence that Sendhil and Shawn fell into a trap and stayed there. Scarcity creates its own trap.

way, our argument in this book is quite simple. Scarcity captures our attention, and this provides a narrow benefit: we do a better job of managing pressing needs. But more broadly, it costs us: we neglect other concerns, and we become less effective in the rest of life.

fields. In large-scale marketing experiments, some customers are mailed a coupon with an expiration date, while others are mailed a similar coupon that does not expire. Despite being valid for a longer period of time, the coupons with no expiration date are less likely to be used.

Focus is a positive: scarcity focuses us on what seems, at that moment, to matter most. Tunneling is not: scarcity leads us to tunnel and neglect other, possibly more important, things.

hard. “Milk” is such a canonically white object that, once activated, it crowds out any others. This is a basic feature of the mind: focusing on one thing inhibits competing concepts. Inhibition is what happens when you are angry with someone, and it is harder to remember their good traits: the focus on the annoying traits inhibits positive memories.

Focusing on something that matters to you makes you less able to think

about other things you care about. Psychologists call this goal inhibition.

Scarcity creates a powerful goal—dealing with pressing needs—that inhibits other ...

Consistent with the focus dividend, people were more effective guessers on the picture they were poor on. But they also tunneled: they neglected the other picture. And this was not efficient. They performed so much worse on the neglected picture that they earned, overall, fewer points than subjects who were poor on both pictures.

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.

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.

Self-control relies heavily on executive control. We use executive control to direct attention, initiate an action, inhibit an intuitive response, or resist an impulse. In

Small budgets make for bulky items and for complex packing; large budgets make for granular items and for easier packing.

Scarcity also makes us experts—expert packers. Without the luxury of slack, we come to understand the value of each inch of space in our suitcases. The poor ought to know the value of a dollar, the busy the value of an hour, and dieters the value of a calorie.

But frugality does not capture the experience of scarcity. The frugal have a principled conscientiousness about money. The poor must be vigilant about trade-offs. When making a purchase, the frugal consider whether the price is “good.” The poor, in contrast, must ask themselves what they must give up to afford that price. Without engaging in real trade-offs, the frugal, like all those who live with abundance, have a hard time making sense of a dollar. So they rely on context. Such was the case with Alex and the rickshaw. He sold his time so cheaply (and inconsistently) because he used his context to determine the “reasonable” price for a rickshaw ride. Alex was frugal but not poor.

We need cognitive resources to gauge future needs, and we need executive control to resist present temptations. As it taxes our bandwidth, scarcity focuses us on the present, and leads us to borrow.

Patching is a lot like borrowing, a failure to invest and to commit the resources now so that the job is done correctly.

Putting off an important but not urgent activity is like borrowing. You gain time today by not doing it. But you incur a cost in the future: you will need to find time (possibly more time) to do it at some later point. In the meantime you may pay a cost for not having done it or lose the benefits that taking care of it could have brought.

These various behaviors share one obvious feature: people are behaving myopically. This leads to the most basic implication of tunneling. When we focus so intensely on making ends meet now, we plan less effectively for the future. Of course, studies have shown that planning is a problem for all people. But scarcity makes this problem a whole lot worse.

This contrast between Felix and Oscar clarifies what we mean by a scarcity trap. Both face clear constraints, but Oscar is trapped into scarcity through his own behaviors. More generally, the scarcity trap is more than a shortage of physical resources. It is based on a misuse of those assets so that there is an effective shortage. It is constantly being one step behind, constantly paying off last month’s expenses. It is a way of managing and using what you have so that it looks and feels like you have even less. An initial scarcity is compounded by behaviors that magnify it.

THE SILVER LINING The poor stay poor, the lonely stay lonely, the busy stay busy, and diets fail. Scarcity creates a mindset that perpetuates scarcity. If all this seems bleak, consider the alternative viewpoint: the poor are poor because they lack skills. The lonely are lonely because they are unlikable; dieters lack willpower; and the busy are busy because they lack the capacity to organize their lives. In this alternative view, scarcity is the consequence of deep personal problems, very difficult to change. The scarcity mindset, in contrast, is a contextual outcome, more open to remedies. Rather than a personal trait, it is the outcome of environmental conditions brought on by scarcity itself, conditions that can often be managed. The more we understand the dynamics of how scarcity works upon the human mind, the more likely we can find ways to avoid or at least alleviate the scarcity trap.

Sleep research shows you are not alone. In one study, thirty-eight good sleepers were instructed to go to sleep as quickly as possible. Some of them were told that after the nap they would be giving a speech. Most people really do not like to give speeches. Indeed, this group had far more trouble falling asleep and slept less well when they did. Other data on insomniacs show that they are more likely to be worriers. Put simply, it is hard to sleep well when you have things on your mind.

Reminders are deceptively simple yet are often overlooked. Policy makers can spend millions of dollars in shaping attitudes toward savings but then fail to incorporate reminders urging people to save. We can spend hefty sums on gym membership yet never stop to consider what to do to ensure that the gym stays within the confines of our tunnel.