Introduction

In the modern world, where the number of resources and time never seems to be enough, the concept of scarcity plays a big role in shaping human behavior. In the book “Scarcity: The True Cost of Not Having Enough,” authors Sendhil Mullainathan and Eldar Shafir explore the challenges of scarcity. The book illuminates the connection between limited resources and the cognitive and behavioral shifts they cause. The book introduces us to wide range of scenarios, from the struggles of individuals living in poverty to the time pressures faced by busy professionals. (Mullainathan & Shafir 2014)

The definition of scarcity

By the definition of Mullainathan and Shafir, scarcity means the condition in which individuals or groups have not enough resources to satisfy their needs and desires fully. These resources can vary, including financial capital and time. Crucially, scarcity is not limited to economic deprivation but extends to many other things, making it a relatable phenomenon. Whether one is having challenges with financial hardship, racing against time, or struggling to manage an overloaded mind, the experience of scarcity has consequences for individuals well-being. (Mullainathan & Shafir 2014)

Types of scarcity

Mullainathan and Shafir illuminate three types of scarcity that show up in our lives. Each of the types have unique influence on human behavior:

1. Financial scarcity: This form of scarcity manifests when individuals lack the financial resources needed to cover their basic needs or financial obligations. This kind of situations are living paycheck to paycheck, struggling with debt, or facing unexpected expenses. (Mullainathan & Shafir 2014)

2. Time scarcity: Time scarcity arises when individual lacks the time needed to complete their tasks and responsibilities. The feeling of being constantly rushed, overwhelmed by to-do lists, or struggling to balance work and personal life are situations associated with this form of scarcity. (Mullainathan & Shafir 2014)

3. Cognitive scarcity: Cognitive scarcity is a central theme in the book. In this form of scarcity, the mind is so overloaded that it affects the individuals’ cognitive capabilities such as decision-making and problem-solving. (Mullainathan & Shafir 2014)

These types of scarcity are distinct, but they share similarities in how they affect human behavior. Understanding the commonalities in these forms is important for resolving the challenges they introduce into individuals’ lives. (Mullainathan & Shafir 2014)

Cognitive impact of scarcity: Cognitive tunneling

Scarcity is more the inconvenience. It shapes how individuals perceive, prioritize, and act in their daily lives. Each type of scarcity affects individuals’ decision-making, cognitive processes, and behavior. One of the implications caused by cognitive scarcity is cognitive tunneling. Cognitive tunneling is a phenomenon that can be understood better after looking into the cognitive load theory. (Mullainathan & Shafir 2014)

The cognitive load theory gives the framework for comprehending how scarcity can lead to tunnel vision. The cognitive load theory proposes that the human brain has limited cognitive resources available at any given moment. When individuals experience scarcity, whether it is lack of financial resources, time, or other forms of scarcity, their cognitive load increases. This means that more cognitive resources are used to addressing the immediate concerns associated with scarcity, leaving less resources available for other tasks and decisions. (Mullainathan & Shafir 2014)

Cognitive tunneling occurs when individuals become hyper-focused on addressing their immediate scarcity related concerns, often at a cost of other important tasks. This narrowed cognitive perspective can hinder overall cognitive functioning like ability to process information comprehensively. This can lead to errors, difficulties in multitasking and decision-making. In cognitive tunneling the individual is preoccupied with addressing immediate scarcity so they are more likely to neglect long-term goals and planning which can lead to cycle of scarcity. (Mullainathan & Shafir 2014)

Poverty and scarcity

The connection between scarcity and poverty is a central theme in the book. Mullainathan and Shafir argue that scarcity is not only a consequence of poverty but also a contributing factor to cycle of poverty and economic disadvantage. Understanding this connection is important in comprehending the implications of scarcity on individuals and society as a whole. (Mullainathan & Shafir 2014)

Cognitive tunnelling induced by scarcity can lead individuals to prioritize immediate concerns over long-term planning which can cause financial troubles. This manifests as a constant preoccupation with meeting basic needs such as food, shelter, and utilities. As a result, individuals in poverty may struggle to have cognitive resources to financial planning. (Mullainathan & Shafir 2014)

One of the key insights of “Scarcity” is the concept of “poverty traps.” Poverty traps are cycles that keep individuals and families trapped in poverty due to the effects of scarcity caused issues in decision-making. In poverty traps individuals are facing financial scarcity and make choices that prioritize immediate survival but undermine their long-term consequences. For example, a low-income individual who cannot afford to fix their car may struggle to maintain stable employment because they cannot commute to work. To address this issue and immediate scarcity, they might take out high-interest payday loan to purchase a car. This decision temporarily resolves the transportation issue, but it creates long-term financial burdens keeping the individual in cycle of poverty.  (Mullainathan & Shafir 2014)

Conclusions

The “Scarcity: The True Cost Of Not Having Enough” sheds light on the cognitive and behavioral implications of living with limited resources, meaning scarcity. Scarcity is not limited to financial constrains but extends to many aspects of life like time and cognitive resources. Cognitive tunneling caused by scarcity narrows individuals’ cognitive perspectives that leads to individual having troubles with decision-making and focusing on immediate concerns at the expense of long-term goals. Scarcity also plays a pivotal role in the existent of poverty traps, where individuals in poverty make choices that hinder their long-term economic opportunities. (Mullainathan & Shafir 2014)

Sources:

Mullainathan, S & Shafir, E. 2014. “Scarcity: The True Cost Of Not Having Enough” Penguin books.