What is a scarcity mindset? This psychological state powerfully shapes how you think, decide, and behave, often triggering an involuntary hyperfocus on what you lack while simultaneously draining your mental capacity to handle other areas of life effectively.
While scarcity can sharpen your focus and boost efficiency in the short term, it also taxes your mental bandwidth, leading to poor decisions, neglected priorities, and harmful patterns that deepen the initial scarcity. This article explores how scarcity works in your brain, its cultural implications, and practical strategies to break free from its grip.
Table of Contents
The Scarcity Mindset, Explained
Let’s explain what the scarcity mindset is. It’s closely related to the idea of loss aversion. As humans, we are powerfully guided by our desire to avoid losing what we already have. We are inherently conservative and cautious. Loss aversion is a strong framing effect: we are more afraid of losing something than we are enticed by the hope of gaining something of equal value.
Scarcity is powerful because it manipulates our desire to be in control and have as many options as possible: when we face a deadline or a competitive scramble for a rare item, our freedom to have whatever we want is limited.
Benefits of the Scarcity Mindset
To begin unraveling the impact of scarcity on our brains, we’ll first explain how scarcity helps us do more with less. In their book Scarcity, Sendhil Mullainathan and Eldar Shafir explain the psychology of scarcity in terms of how we behave when we have less than we need. (Shortform note: The authors’ definition of scarcity is key to understanding their ideas because it’s based on our perception of what we have rather than the physical reality of what we have. In other words, anyone can experience scarcity, regardless of how much wealth or time they have compared to others. This differs from other common definitions of scarcity that define it as the physical reality of something being “not plentiful or abundant.”)
The authors argue that once we perceive scarcity, that perception automatically focuses the mind, involuntarily channeling all of our mental energy into coping with that scarcity. In this section, we’ll look at how scarcity makes us more efficient when we’re short on time and money. The authors refer to this enhanced efficiency as the “focus dividend.”
Using Scarce Time Efficiently
When we have an abundance of time to complete something, we tend to work slowly, get distracted, and procrastinate. It’s often only when we realize we’re running out of time that we suddenly find the motivation to complete something quickly. People also work more effectively when they’re under a time crunch (not just faster). In Mullainathan and Shafir’s research studies, people proofread faster and more accurately when they were given shorter weeklong deadlines for three different tasks, as opposed to three weeks to complete all three tasks.
Mullainathan and Shafir also suggest that scarce time changes the way we perceive the world. They claim that we enjoy things more when we only have a limited time for an activity, as opposed to when we feel there’s an abundance of time.
Mullainathan and Shafir cite one study showing that when college seniors perceived that they had scarce time left at college toward the end of the year, they spent more time engaged in college activities, were happier, and appreciated their time more (compared to when they perceived the end of the year as a long way off).
Drawbacks of the Scarcity Mindset
Mullainathan and Shafir argue that we severely underestimate the downside of scarcity, the toll on our mental capacity that they call a “bandwidth tax.” Mental bandwidth is a term that encompasses our cognitive capacity and executive brain function. These concepts boil down to our ability to pay attention to important events, process information, make good decisions, and resist temptations.
Mullainathan and Shafir assert that the same scarcity that gives us laser focus on pressing matters leaves us with little mental bandwidth to do other things in our lives well. This hijacking of our mental bandwidth impacts us in three major ways: It makes us neglect other important areas of our life, decreases cognitive performance, and encourages borrowing habits to meet immediate needs—habits that then exacerbate and complicate the initial scarcities.
Scarcity Makes Us Neglect Other Areas of Our Lives
When our brains are focused on dealing with a scarcity of time or money (and remember this hyperfocus is involuntary and thus out of our control), our decreased mental bandwidth causes us to neglect other aspects of our life that we genuinely care about.
For example, Mullainathan and Shafir point out that when we can’t stop thinking about our to-do list, it prevents us from being present with our loved ones. When we feel busy, we tend to cut out exercise from our schedule or decide we don’t have time to prepare a healthy meal, and we let other things fall by the wayside that we value as important to our well-being. Similarly, when we’re focused on making ends meet at the end of the month, scarcity becomes a distraction from work, family, or even simple tasks like driving.
Lower Cognitive Performance
Mullainathan and Shafir also argue that financial scarcity (and the resulting mental bandwidth shortage) decreases our cognitive performance. In one of the authors’ studies, people did significantly worse on an IQ test when they were given a difficult financial scenario to figure out before the test. This showed how the scarcity mentality decreased performance when people had to make a decision about a difficult trade-off.
Because the subjects were randomly selected (not necessarily poor or rich) and the researchers compared IQ scores in individuals, the data supports the idea that scarcity causes lower cognitive function, and not the other way around. This research on the impact of financial scarcity, along with other similar studies by Mullainathan and Shafir, is the basis for their theory that a mental bandwidth shortage, caused by scarcity, is what keeps people in poverty.
Borrowing Habits Exacerbate Scarcity
Mullainathan and Shafir assert that scarcity of time and money also burdens us by fostering unwise borrowing habits. In the context of time, people “borrow” when they procrastinate on tasks that will take longer later on and take shortcuts that have a higher long-term cost. In a financial context, borrowing involves taking out loans that lead to debt.
These are all forms of what the authors call “scarcity traps”: feedback loops where our low mental bandwidth causes us to fall farther and farther behind on time or money, and the scarcity builds on itself. Thus, the initial scarcity is a matter of chance or systemic conditions (like being born into poverty or facing cultural expectations for high work productivity), but then our bandwidth shortage causes us to further exacerbate the scarcity.
Mullainathan and Shafir explain that when we have less mental bandwidth, we lose the executive function that weighs decisions carefully because they’re outside of the narrow focus caused by scarcity. Researchers refer to this phenomenon as “present bias.”
In the rest of this section, we’ll discuss how scarcity can lead to procrastination and financial debt, both of which exacerbate the initial scarcity.
Procrastination
People with scarce time engage in a form of borrowing when they procrastinate on things that will take longer later and opt for quick fixes to problems. In these scenarios, our scarcity-handicapped brains can’t recognize that ignoring important tasks is likely to increase scarcity.
For example, if you procrastinate on cleaning out your email inbox, it becomes a more time-consuming task with each passing day as more emails keep coming in. Therefore, over time, you’re likely to keep procrastinating and the time cost keeps increasing.
Mullainathan and Shafir write that another form of procrastinating involves taking shortcuts by doing a “quick fix.” The quick solution helps you manage a tight schedule in the short term but will only be a temporary bandage for something that will get more expensive or more time-consuming to fix later. For example, if you patch a leaky pipe instead of replacing it, you’re likely to have major water damage and many more maintenance issues than you started with when the patch fails.
Financial Debt
Mullainathan and Shafir also discuss the ways that people often spiral into debt when they’re unable to meet their basic needs. They write that poor people are particularly susceptible to taking out payday loans. A payday loan is generally a short-term, high-cost loan that gives people access to quick cash when they need it before their payday. It offers an easy solution to urgent problems presented by scarcity—things like making a car payment, keeping the lights on, paying the rent, and buying groceries.
Mullainathan and Shafir explain that although payday loans solve the problem temporarily, people end up paying compounding interest on loans because they’re unlikely to pay them off. Each month, they’ll have the same expenses plus the loan fees, so the fees roll over, and the loans get increasingly difficult to pay off. The authors note that sometimes it’s worth it to take out a loan when we really will have more resources later, or it’s simply a matter of timing, and we can pay it off soon. However, with limited bandwidth, we don’t have the capacity to analyze the long-term consequences of the loan and make a rational decision.
Scarcity and Culture
As a collective, we have experienced (and continue to experience) local, national, and global trauma that has stolen our sense of safety and created a culture of scarcity. Culturally, we’re traumatized, and it manifests as a hyper-vigilant, pervasive, underlying worry. As a way of control, we hold up an idealized image of ourselves, our lives, our days (in other words, Instagram-worthy), and when reality doesn’t hold up, we experience suffering. From a cultural standpoint, this creates problematic results, says Brené Brown in Daring Greatly.
Result #1: Shame and Lack of Self-Worth
Shame is apparent in our culture in the way we use criticism as a weapon or a means of disempowering others, in the way our sense of worthiness is dependent on validation, and in the way we reward perfectionism and punish mistakes. Shame makes you seek confirmation outside of yourself to prove your worthiness, instead of trusting that you’re worthy regardless of your flaws.
Result #2: Comparison
In a culture of scarcity, we are always comparing our lives to the lives of others, or to our idea of the perfect life. Competition is healthy for growth, but over-comparison impedes growth by limiting it to a narrow standard or expectation.
Result #3: Disengagement
Culture of scarcity is full of disengagement—we are disengaged in the way we glorify hiding or detaching from pain (stoicism), as well as in our collective focus on serving the self and not the other (individualism). Disengagement prevents you from taking risks in your life, because you are detached from your willingness to be vulnerable. You’re not present enough to show up. When disengaged, you’re not able to be seen or heard, and you’re not able to truly see or hear others, which impedes your ability to connect, and activates your fear of inadequacy. When you’re not able to connect in meaningful ways, or feel like others don’t have the desire to invest time and effort into connecting with you, you doubt your worthiness of love.
Result #4: Narcissistic Behavior
The more you compare your life to the ideal life, the more inadequate you will feel as a result of the scarcity mentality. The more inadequate you feel, the more you attach yourself to the ideal. It’s a vicious cycle, and we’ve gotten so caught up in it, that we’ve begun to display more and more “narcissistic” behavior as a collective. We demonstrate behaviors like hyper-prioritization of our own needs, putting others down to make ourselves feel more important, or basic dismissiveness. Instead of looking more closely at the root of these behaviors, we chalk them up to us all being a bunch of hopeless narcissists.
Narcissistic behavior is learned behavior, which means it is not the problem, but the result of a problem. Narcissists, deep down, behave the way they do out of fear and shame. They want to be seen as extraordinary, because they believe that is what they need to be to belong. We also have a tendency to demonize these traits, which reinforces the mentality of scarcity.
Your behavior is not who you are. When the world defines you by your behavior, you are more ashamed or afraid to ask for help. The culture of scarcity sees shame as a solution, but shame is the root of the problem, and the way we currently hold that problem impedes our ability to actualize a real solution.
Overcoming the Culture of Scarcity Mentality: Wholeheartedness
How do we address the root of the problem? The antithesis to a scarcity mentality, according to Brown, is wholeheartedness. Wholeheartedness revolves around the willingness to be vulnerable and the belief that you are already enough.
For example, you can take steps to be more vulnerable by:
- Setting a boundary with someone you love because you know you are worthy of better treatment
- Trying out a sport you’ve never played before
- Sharing something special you’ve created with others
Each of these reflects a willingness to expose yourself, and demonstrates a belief in your worthiness regardless of the outcome of the experience.
The price of buying into the culture of scarcity is that you become unable to embrace vulnerability or believe in your worth. If you want to live a wholehearted life, you need to confront these blocks, and move beyond the feeling of “never enough.”
Scarcity and Health
In The Mindful Body, Ellen J. Langer states that many people think of health as a limited resource, which keeps them in a fixed mindset that hinders their improvement. This is due to a pervasive scarcity mindset—the belief that there’s only a certain amount of every quality and resource available. In this belief system, you may have a fixed idea of how much of each quality or resource you and other people are allotted. For instance, you may believe that you have an inherently low athletic ability, but a higher-than-average allotment of math skills.
Langer argues that this scarcity mindset exists to create an artificial hierarchy—it’s in the best interest of those with the majority of a resource to stay at the top. However, the standards used to measure personal qualities and achievements aren’t absolute or objective. They’re always determined by people and are therefore inherently changeable and flawed. Once you realize this, more possibilities open up for you. You see that resources and qualities aren’t fixed, and you can do a lot to change your circumstances.
Langer explains that people—especially those with chronic illnesses—often think of health in terms of fixed scarcity or abundance, believing that it can only stay the same or get worse. They then stop looking for ways to help themselves or change their situation. Langer disputes this belief: She argues that anyone can live a healthy life.
For instance, say you’re diagnosed with arthritis. You view your condition as one that guarantees decline, thinking of yourself as one of the people who got a lesser share of good health. You believe you have a fixed amount of mobility and energy, and it’ll only decrease over time. You stop doing activities you enjoy, like yoga and gardening. You stop trying new treatments and abandon your exercise routine, thus carrying out a self-fulfilling prophecy.
However, if you view good health as something you can access, you’re more likely to look for ways you can improve your health. Instead of accepting your fate, you try new activities like gentle stretching, swimming, and cooking anti-inflammatory recipes. Your arthritis won’t disappear, but you can potentially live an even fuller and healthier life than you did before your diagnosis.
Case Studies: The Cookie and Television Examples of Scarcity
The case studies below can help you visualize how the scarcity mindset works. Let’s look at two examples that dig deeper into the psychology of scarcity.
How Cookies Triggered Scarcity
According to Influence by Robert B. Cialdini, a famous experiment by social psychologist Stephen Worchel demonstrated just how vulnerable human beings are to man-made scarcity. Test subjects were asked to eat a chocolate chip cookie from a jar and rate its taste and overall quality. But there was a twist: half the participants were asked to evaluate a cookie from a jar that contained ten, while the other participants were asked to rate a cookie from a jar containing only two.
Based on what you know about the psychology of scarcity, you can probably guess that participants rated the “rarer” cookie as being tastier and of higher quality (though the cookies in both jars were identical).
OK, no surprise so far. But two additional findings from the study show that the psychology of scarcity is even stronger under certain conditions.
Worchel wanted to test and see if people would desire the cookies more not only if they began as scarcer, but if they had recently become scarcer.
In this experimental twist, participants were first asked to evaluate cookies from the ten-cookie jar. They were then asked to rate a cookie from the two-cookie jar. Thus, the previously abundant supply of cookies was suddenly and drastically reduced.
The recent scarcity effect was clear. This group that experienced a sharp drop in their cookie supply rated the cookies higher than those who had only known a scarcity mindset from the beginning.
We can see the psychology of scarcity dynamic playing out in the real world, beyond the confines of this cookie experiment. People in the Soviet Union in the 1980s had become accustomed to a higher material standard of living and greater government tolerance of free expression under Premiere Mikhail Gorbachev’s twin policies of perestroika (reform) and glasnost (openness).
When a cadre of Communist Party hardliners ousted Gorbachev in 1989 in a coup and sought to reinstate the repressive policies of the Soviet past, the results were shocking to party leadership: the people rebelled, rioted in the streets, and refused to give back their newly earned and hard-fought freedoms.
This was a classic example of the power of recent scarcity: freedoms were being taken away that people had become accustomed to. Once the Soviet people had tasted freedom, it was clear that they would fiercely resist any attempts to claw it back.
Psychology of Scarcity Through Social Competition
Worchel added yet another twist to the scarcity cookie experiment. Certain participants who saw their cookie supply dwindle from ten to two were told that the experiments had made a mistake and over-assigned cookies to their jar.
Another subset of participants, meanwhile, was told that their cookies had to be taken away so that they could be given to other raters.
The results of the scarcity effect were clear: people liked the cookies more when they became scarce through social competition that they did when they became scarce by accident.
Psychology of Scarcity in Television
A famous example from the world of network television illustrates just how firm a grasp scarcity-through-competition can have over people’s rational thought process, according to Cialdini. In the 1970s, Barry Diller was in charge of prime time programming at ABC. In 1973, he and his rival network executives were presented with what seemed like a great opportunity: to air the hit film, The Poseidon Adventure.
A bidding war for the rights to air the film broke out between Diller and the executives from NBC and CBS. In the end, Diller won the prize by agreeing to pay the movie studio the then-unprecedented sum of $3.3 million for one airing of the film. This was a gross overpayment by any standard: ABC ended up losing $1 million on the deal!
The scarcity effect (and its social competition accelerant) was the likely culprit for Diller’s colossal misjudgement. This was the first time a studio had put the rights to a film up for auction to the networks: the competitive frenzy and desire not to be outbid made Diller vastly over-value the film. Diller was duped by a scarcity mindset.
Find Out More About the Scarcity Mindset
If you found this article interesting and want to learn more about willpower, check out the full guides to the books mentioned here:
FAQ
What is the scarcity mindset?
The scarcity mindset is a way of thinking shaped by the fear of losing what we have and the feeling that resources like time, money, or opportunity are limited.
How is scarcity connected to loss aversion?
Scarcity taps into loss aversion by making us more focused on avoiding losses than pursuing gains of equal value.
What is the “focus dividend” of scarcity?
When we perceive scarcity, our attention narrows and we often become more efficient at managing the scarce resource.
Why can scarcity be harmful to mental performance?
Scarcity consumes mental bandwidth, reducing our ability to think clearly, make good decisions, and manage other areas of life.
How does scarcity lead to procrastination or debt?
With limited mental bandwidth, people rely on short-term fixes like procrastination or borrowing, which often worsen the original scarcity.
How does a culture of scarcity affect society?
A culture of scarcity fuels shame, comparison, disengagement, and behaviors rooted in fear of inadequacy.
What is the opposite of a scarcity mindset?
According to Brené Brown, the opposite of scarcity is wholeheartedness, which is grounded in vulnerability and the belief that you are already enough.
