Scarcity means having too little of something. Usually we think about money, but scarcity might also be not having necessary language skills, poor emotional control, poor health, no positive relationships with friends or role models, not understanding hidden rules, or lacking other kinds of social capital. It might even be no uninterrupted time, so that a person can’t focus on an issue.
In last week’s column I wrote about scarcity’s effects on decision making. Scarcity makes it hard to reason logically and solve problems. The ability to plan and complete a project is limited because the focus is somewhere else. When I was researching the scarcity mindset, I found some interesting research that was cited by Sendhil Mullainathan (Harvard) and Eldar Shafir (Princeton) in their book Scarcity: Why Having Too Little Means So Much.
The professors use the term “bandwidth” to refer to refer to two components of mental function. The first is our cognitive capacity, which means our ability to pay attention, solve problems, retain information, think logically, and make good decisions. The second is executive control, managing our cognitive activities. This would include planning, focusing, and controlling our actions.
Shafir and Mullainathan conducted some research about fifteen years ago in New Jersey. One of the scenarios: “Imagine that your car has some trouble, which requires a $300 service. Your auto insurance will cover half the cost. You need to decide whether to go ahead and get the car fixed or take a chance and hope that is lasts for a while longer.” Another scenario required a $3000 repair. (With inflation, those amounts would probably be doubled today.) With income data, people were classified as being rich or poor.
For the $300 repair, people in both income groups decided to get the car fixed. People in both groups thought they could come up with the $150 they needed. That wasn’t true for the $3000 repair, however. For that repair, more than half the poor people would just stick it out and hope for the best.
A Bankrate report that was published in January, 2025, surveyed more than 1,000 U.S. adults about their ability to handle a surprise bill. The annual study found that 59% of Americans in 2025 don’t have enough savings to cover an unexpected $1,000 emergency expense. Of course, some could use credit or hit up a family member for help. But those aren’t always an option for the poor.
The behavioral research didn’t stop at the ability to pay for an unanticipated repair. It included the research shared last week about farmers in India who received their income in one lump sum. Their financial decisions were rational and intelligent when they had money. But toward the end of the year, they pawned things and put off paying for things like repairs or even ordinary bills. Their decisions were impulsive and illogical.
Research on sleep deprivation showed the same effect on decision making, limiting bandwidth.
Their book also shares research on the effect of noise on students in a school next to a railroad line. There was a striking difference between the two sides of the school. By sixth grade, students who had consistently been on the noisy side were a full year behind. When the school installed noise padding, that difference disappeared.
Their conclusions? The poor do have lower mental capacity, or bandwidth, than those who are well off. They often make poor decisions. But it’s not because they are less capable. Instead, it is because their mind has been captured by scarcity.