Psychological Responses to Scarcity

Abstract

Scarcity is the condition of having insufficient resources to cope with demands. This condition presents significant challenges to the human cognitive system. For example, having limited financial resources requires the meticulous calculation of expenses with respect to a budget. Likewise, having limited time requires the stringent management of schedules with respect to a deadline. As such, scarcity consumes cognitive resources such as attention, working memory, and executive control and elicits a range of systematic and even counter-productive cognitive and behavioral responses as a result. Specifically, scarcity induces an attentional focus on the problem at hand, which facilitates performance by enhancing cognitive processing of information relevant to the problem, increasing the efficiency of resource use, and stabilizing the perception of value. Such prioritization of the problem at hand may seem advantageous, but it can produce undesirable consequences. For example, scarcity causes myopic and impulsive behavior, prioritizing short-term gains over long-term gains. Ironically, scarcity can also result in a failure to notice beneficial information in the environment that alleviates the condition of scarcity. More detrimentally, scarcity directly impairs cognitive function, which can lead to suboptimal decisions and choices that exacerbate the condition of scarcity. Thus, scarcity means not only a shortage of physical resources (e.g., money or time) but also a deficit of cognitive resources (e.g., attention, executive control). The cognitive deficits under scarcity are particularly problematic because they impair performance and lead to counter-productive behaviors that deepen the cycle of scarcity. In addition, people under financial scarcity suffer from stigmas and stereotypes associated with poverty. These social perceptions of poverty further burden the mind by consuming cognitive resources, weakening performance in the poor. Understanding the cognitive and behavioral responses to scarcity provides new insights into why the poor remain poor, identifying the psychological causes of scarcity, and illuminating potential interventions to stop the cycle of scarcity. These insights have important implications for the design and the implementation of policies and services targeting the populations under scarcity.

Poverty and economic decision making: a review of scarcity theory

“…3 Mullainathan and Shafir did not provide a single umbrella term for the theory discussed in their book. Others refer to the theory as ''psychological responses to scarcity'' (Zhao and Tomm 2018) or ''resource scarcity'' (Hamilton et al 2019a, b). We will consistently use the term ''scarcity theory,'' referring to the title of their book.…”

“…Our work contributes to the current literature by providing an up-to-date and integrative overview of the literature and by critically reviewing the evidence of scarcity theory applied to poverty and economic decision making. Previous literature studies have concentrated on providing an overview of the key ideas of scarcity theory and evidence supporting this theory (Shah et al 2015;Zhao and Tomm 2018). Others discussed evidence for specific relationships of the theory as part of a broader literature review (Adamkovič and Martončik 2017;Cannon et al 2019;Dean et al 2019;Hamilton et al 2019a, b;Kremer et al 2019;Sheehy-Skeffington and Rea 2017).…”

Distinct impacts of financial scarcity and natural resource scarcity on sustainable choices and motivations

“…This is a completely reasonable response to perceived scarcity however, as previous work has suggested, the scarcity mindset creates cognitive burdens, potentially making these everyday consumer purchases more effortful and computationally demanding (Mani, Mullainathan, Shafir, & Zhao, 2013). Scarcity highlights the need to choose cheaper options, and also forces the need to meticulously calculate the costs with respect to the available budget (Shah, Zhao, Mullainathan, & Shafir, 2018; Tomm & Zhao, 2016; Zhao & Tomm, 2018). Future studies can assess whether the salience of price under conditions of financial scarcity may have a positive impact on sustainable consumer choices, which might have a higher up‐front cost, but also last longer.…”

“…Scarcity creates a cognitive load by directing attention in domains where the scarcity is salient (Mullainathan & Shafir, 2013; Shah, Mullainathan, & Shafir, 2012). Specifically, scarcity may induce an attentional focus on the savings and costs at present (Zhao & Tomm, 2018), while preventing attention to future gains or losses (Shah et al, 2012; Tomm & Zhao, 2016). Outside of consumer behavior, scarcity can impact self‐construal, specifically how connected or disconnected one feels from a group or community, which can affect prosocial attitudes and behaviors (Roux, Goldsmith & Bonezzi, 2015; Sharma, Mazar, Alter & Arieli, 2014).…”

Water insecurity: An agenda for research and call to action for human biology

“…Now, we all get stressed and upset from time to time, and this might not seem like a very big deal. But people who are constantly fearful and worried about their economic insecurity are at high risk for developing depressive and anxiety disorders, and these disorders develop into a vicious cycle that then make it harder for them to acquire resources (Zhao & Tomm, ).…”