Scarcity: Why Having Too Little Means So Much

In Scarcity, Mullainathan and Shafir dissect the intricate ways in which scarcity shapes human cognition and behavior, proposing that understanding the psychology of scarcity is crucial for developing effective strategies to mitigate its adverse effects on decision-making and well-being.

The authors ground their initial exploration of the psychology of scarcity in the concept of the “bandwidth tax,” which posits that scarcity consumes cognitive resources, thereby limiting individuals’ mental capacity and decision-making abilities. Mullainathan and Shafir delve into how this cognitive tax manifests in various aspects of life, drawing on personal anecdotes, empirical research, and theoretical analysis. Their study involving sugarcane farmers in India starkly demonstrates how financial scarcity before harvest significantly reduces cognitive function, only for it to improve post-harvest.

Mullainathan and Shafir also illustrate the bandwidth tax through their own experiences, noting how their performance while playing games on their phone decreased when they were under the pressure of book deadlines: “Tense days of writing under deadline led to remarkably weak scores. This was a vivid illustration of how pervasive the bandwidth tax can be” (227). This example humanizes the concept of the bandwidth tax while providing a clear illustration of its impact on cognitive resources in daily life.