Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

We normally think of time management and money management as distinct problems.

The capture of attention can alter experience. During brief and highly focused events, such as car accidents and robberies, for example, the increased engagement of attention brings about what researchers call the “subjective expansion of time,” a feeling that such events last longer, precisely because of the greater amount of information that is processed.

Because we are preoccupied by scarcity, because our minds constantly return to it, we have less mind to give to the rest of life. This is more than a metaphor. 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.

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. This

We call this the focus dividend—the positive outcome of scarcity capturing the mind.

Just as we cannot effectively tickle ourselves, it is exceedingly difficult to fool ourselves into working harder by faking a deadline. An imaginary deadline will be just that: imagined.

As the psychologist Daniel Kahneman would say, scarcity captures the mind both when thinking fast and when thinking slow.

One of your biggest clients has informed you that it will be taking its business elsewhere. You convince the account manager to listen to one last pitch. She agrees but says it must take place tomorrow. You cancel all your meetings and put off all your other tasks. You pour all your time into the pitch. One appointment, though, cannot be avoided. Your daughter has her city championship softball game tonight. For a moment you even consider skipping that, but your better side (barely) wins out: surely her pitches feel as important to her as your sales pitch feels to you. On the way to the game, your daughter realizes she forgot her lucky charm. You snap at her before turning around to pick it up. By the time you have regained your composure, it’s too late. She was already nervous for the game and now you’ve made her more nervous. Something fun has become tension filled. At the game, you can’t enjoy yourself. Your mind keeps turning to that presentation. Not that you can work on it now—you just can’t focus on the game. You’re distracted, and when your daughter occasionally catches a glimpse of you, you know she knows it. Lucky for you, her team wins and the jubilation helps cover your mistakes. But certainly your performance that evening would not put you in any parenting Hall of Fame. John has an exam tomorrow. He is putting himself through college. Though his parents saved for all their kids’ education, they did not save enough. They never dreamed that tuition would rise so...

because the focus on scarcity is involuntary, and because it captures our attention, it impedes our ability to focus on other things.

Bandwidth measures our computational capacity, our ability to pay attention, to make good decisions, to stick with our plans, and to resist temptations. Bandwidth correlates with everything from intelligence and SAT performance to impulse control and success on diets. 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.

An early study tested this idea by giving subjects a simple enough task: push a button when you see a red dot on the screen. Sometimes, just before the dot appeared, another picture would flash on the screen. For nondieters, this picture had no effect on whether people saw the dot. For dieters, in contrast, something interesting happened. They were less likely to see the red dot if they had just seen a picture of food. Flashing a picture of a cake, for example, reduced dieters’ chance of seeing the red dot immediately afterward: it was as if the cake had blinded them. This happened only with pictures of food; nonfood pictures had no effect. 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. When the dot appeared, their minds were elsewhere, still thinking about the food. All of this happened in a fraction of a second, too quick to control. Too quick to even be aware of. The title of the study says it best: “All I Saw Was the Cake.”

scarcity directly reduces bandwidth—not a person’s inherent capacity but how much of that capacity is currently available for use.

To test this hypothesis, we need to refine our definition of bandwidth. We are using the term as a placeholder for several more nuanced and carefully researched psychological constructs. In effect, we are walking a fine line. As psychologists, we care about the distinctions, functional and otherwise, between the various constructs and their corresponding brain function. And bandwidth is a generic term that obscures those distinctions. But as social scientists interested in the effects of scarcity, we are willing to leave the fine distinctions alone, much as one might refer to democracy or subatomic particles while avoiding the many finer distinctions that these afford.

As Mischel put it, “Once you realize that willpower is just a matter of learning how to control your attention and thoughts, you can really begin to increase it.”

In another study, white Australian students were served food, but in this case it was something they found revolting: a chicken foot cooked in a Chinese style that preserved the entire foot intact, claws included. The challenge for the subjects was that this was served by a Chinese experimenter, creating some pressure to act civilized. As in the cake study, some subjects’ minds were loaded: they were asked to remember an eight-digit number. Those whose minds were not loaded managed to maintain composure, keeping their thoughts to themselves. Not so with the cognitively loaded subjects. They would blurt out rude comments, such as “This is bloody revolting,” despite their best intentions.

estar no momento eh a melhor forma de autocontrole

You wouldn’t be surprised if the cashier hadn’t heard the order of fries just when a train passed by. So you (and her manager) shouldn’t be surprised if, lost in thought about how to make rent this month, she overlooks the order of fries. She is not being careless. She is preoccupied. Thoughts such as, Should I risk being late again on my credit card? can be every bit as loud as a passing train. The manager with the impending sales pitch tries to focus on her daughter’s game. Yet before she knows it, she finds herself ruminating on the sales pitch. The student tries to focus on the exam at hand but is constantly interrupted by thoughts of the looming tuition bill. Even smiling and being pleasant is hard when your mind is taxed. The employee snaps at rude customers more often than she intends. The parent snaps at the child. A taxed bandwidth leads to carelessness. The student forgets his study group meeting. The server rings up the wrong item. The bandwidth tax changes us in surprising

For most people, a $50 savings looks large for the $100 DVD player (50 percent off!), but small for the $1,000 laptop (a mere 5 percent savings). Yet those at the Trenton soup kitchen seemed unmoved by all this; their responses barely changed. How did scarcity—in this case in money—upend this traditional finding?

There is nothing in the prospect of a sharp, unceasing battle for the bare necessities of life, to encourage looking ahead, everything to discourage the effort. —JACOB RIIS, HOW THE OTHER HALF LIVES

In a way the engineers were doing exactly as asked: they were solving problems quickly. Management, you might think, had committed a classic mistake. As organizational researchers would describe it, they were “paying for A while hoping for B.” They were asking for speed while hoping for speed and quality.

Everywhere is walking distance if you have the time. —STEVEN WRIGHT

Now, might not willpower build up with practice? Might not the poor, having to exercise it constantly, develop stronger willpower? There is little evidence to show that willpower capacity increases with use. (Think

Recent research shows that self-control may actually get depleted as we use it. One study, for example, put dieters in a room with some highly tempting snacks (Doritos, Skittles, M&Ms, salted peanuts) and gave them a computer task to perform. For some, the snacks were placed, highly visible, on the table right next to them. For others, the snacks were far away, out of mind. Having completed the computer task, subjects were given access to large containers of ice cream. Those who had been sitting next to the snacks, continuously resisting the urge, finally caved. They ate significantly more ice cream than those who were less tempted by the distant snacks. Researchers in this field have likened willpower to a muscle, which fatigues with use. By this account, a persistent need to resist temptation would deplete, making it all the more difficult to escape the scarcity trap.

What are the costs? By now we know the answer to those questions: “I can’t worry about that now.” Those concerns fall strictly outside the tunnel.

Scarcity is not merely the gap between resources and desires on average. Even if, as in the case of the vendor, there are many days with slack, it is the days of scarcity that matter. To be free from a scarcity trap, it is not enough to have more resources than desires on average. It is as important to have enough slack (or some other mechanism) for handling the big shocks that may come one’s way at any moment.

We have so far focused on problems caused by the scarcity mind-set. We tunnel and we neglect. Our bandwidth is taxed, and we are less farsighted and more impulsive. All this might inadvertently suggest that during periods of abundance we are perfectly calculating and farsighted. Of course we are not. Decades of research have shown that even—no, especially—at the best of times we are prone to procrastination, an exaggerated focus on the present, and bouts of fuzzy optimism. We put off work that needs to be done. We squander money that should have been saved. We misallocate our abundance, saving and accomplishing too little sufficiently to insulate from scarcity that might come. Of course, both the rich and the poor do this. But the rich, because they have slack, come out fine, whereas the poor and the busy, carrying on with too little slack, are one shock away from falling into a scarcity trap.

Staying clear of the scarcity trap requires more than abundance. It requires enough abundance so that, even after overspending or procrastinating, we still leave enough slack to manage most shocks. Enough abundance so that even after extensive procrastination, we still have enough time left to manage an unexpected deadline. Staying out of the scarcity trap requires enough slack to deal with the shocks the world brings and the troubles we impose on ourselves.

Tunneling leads us to borrow so that we are using the same physical resources less effectively, placing us one step behind. Because we tunnel, we neglect, and then we find ourselves needing to juggle. The scarcity trap becomes a complicated affair, a patchwork of delayed commitments and costly short-term solutions that need to be constantly revisited and revised. We do not have the bandwidth to plan a way out of this trap. And when we make a plan, we lack the bandwidth needed to resist temptations and persist. Moreover, the lack of slack means that we have no capacity to absorb shocks. And all this is compounded by our failure to use the precious moments of abundance to create future buffers.

To make matters worse, the more you try not to think about it, the more you do. Psychologists call this an ironic process. When asked to not think of a white bear, people can think of little else. Returning to the lonely, we now

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

This discussion clarifies what we mean by poverty. We mean cases of economic scarcity where changing what you want, or think you need, is simply not viable. Some

Disease after disease—HIV, diabetes, tuberculosis—the same pattern repeats itself. No matter the location, the kind of medication, or the side effects, one thing stays the same: the poor take their medication least consistently.

The overwhelming question in this case is an old, almost tired one. Why do the poor fail so badly and in so many ways? This is the elephant in the room.

Our data suggest causality runs at least as strongly in the other direction: that poverty—the scarcity mindset—causes failure.

This experience transformed how cockpits are designed. Chapanis and others came to realize that many pilot errors were really cockpit errors. Until then, the focus had been on training pilots and ensuring alertness, on producing “excellent pilots” who make few mistakes. But Chapanis’s conclusions changed this. Of course pilots must be trained; of course you must select for the best. But no matter how well you train them or pick them, they will make mistakes, especially if put in confounding contexts.

Imagine you come home from a day at work, worried about where you will find the money to make this month’s rent, cover all the bills, and pay for your daughter’s birthday party. You have not been sleeping well. A few weeks ago, you signed up for a training program in computer skills that one day could help you move up to a better job. But this evening the benefits of such training are abstract and distant. You’re exhausted and weighed down by things more proximal, and you know that even if you go you won’t absorb a thing. Now roll forward a few more weeks. By now you’ve missed another class. And when you go, you understand less than before. Eventually you decide it’s just too much right now; you’ll drop out and sign up another time, when your financial life is more together. The program you tried was not designed to be fault tolerant. It magnified your mistakes, which were predictable, and essentially pushed you out the door.

It is important to emphasize that fault tolerance is not a substitute for personal responsibility. On the contrary: fault tolerance is a way to ensure that when the poor do take it on themselves, they can improve—as so many do. Fault tolerance allows the opportunities people receive to match the effort they put in and the circumstances they face. It does not take away the need for hard work; rather, it allows hard work to yield better returns for those who are up for the challenge, just as improved levers in the cockpit allow the dedicated pilot to excel. It is a way to ensure that small slipups—an inevitable consequence of the bandwidth tax—do not undo hard work.

There is a general lesson here for how (and how not) to structure incentives. Incentives that fall outside the tunnel are unlikely to work. Imagine

From this perspective, help with child care is much more than that. It is a way to build human capital of the deepest kind: it creates bandwidth.

Child care provides more than just child care, and the right financial product does much more than just create savings for a rainy day. Each of these can liberate bandwidth, boost IQ, firm up self-control, enhance clarity of thinking, and even improve sleep. Far-fetched? The data suggest not.

Saving is an important but not urgent task, the kind that nearly always falls outside the tunnel. At any point in time, there are more pressing things to do than save. So we brought savings back into the tunnel for a moment by making it top of mind. Having asked people what they were saving for and how much, we would send them, at the end of each month, a quick reminder—a text message or a letter. This

Changing the default—what happens when a decision is neglected—can have strikingly large effects.

To see the logic of taxing bandwidth, think about it this way. Imagine we imposed a hefty financial charge to filling out applications for financial aid. We would quickly realize that this is a silly fee to impose; a program aimed at the cash stretched should not charge them much cash. Yet we frequently design programs aimed at people who are bandwidth-stretched that charge a lot in bandwidth. To use another vivid metaphor, it’s like going to a juggler who is in need of help and tossing one more ball in the air for him to juggle. This, incidentally, is not an argument for removing all snags.

a world of scarcity, long deadlines are a recipe for trouble. Early abundance encourages waste, and by the time the deadline approaches, tunneling and neglect settle in. Breaking a long deadline into progressively earlier chunks can cut this arc. The

People overlook bandwidth. When you’re busy and must decide what to do next, you might take into account the time you have and how long it will take you, but you rarely consider your bandwidth. You might say, “I only have half an hour. I will do this small task.” You rarely say, “I have little bandwidth. I will do this easier-to-accomplish task.” Of

Many workers, as we saw in chapter 5, resort to payday loans. Yet it’s worth observing that a payday loan is often simply a loan against work that has already been done. The worker who takes a payday loan halfway through the pay cycle has already earned half her paycheck. The need for a loan is largely due to the fact that payment happens with a delay. Why should an employer have workers taking these loans, potentially falling into scarcity traps, taxing bandwidth, and resulting in lower productivity, especially when the employer can himself give pay advances at low cost? How valuable would it be for employers to improve productivity by offering the right financial products and creating bandwidth?

Follow the thread of scarcity far enough and it leads back to abundance: the recession that is caused by our behavior during the boom; the last-minute cramming that can be blamed on our inaction in the weeks prior. While scarcity plays a starring role in many important problems, abundance sets the stage for it.