Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

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.