Scarcity

Why having too little means so much!

Science of ScarcityEconomics

Scarcity: lack of resources tangible or

intangible- time, money, options etc

Benefits of scarcity
1. Get the most out of what
you have- the benefit of
deadlines. People perform better
under deadlines because
distractions become less
tempting
The negative side of scarcity:
Tunnelling -Scarcity leading to a
restricted focus ignoring things
in periphery.. The Hunton Case

Scarcity can have both positive and

negative effects- the Amanda Cohen
case

When in a short time, you get

more out of it- Focus Dividend:
positive outcome of scarcity
capturing the mind
--Angry birds experiment
Tunnelling changes the way we
choose- Inhibition (Name 10
white items and it will be clear)

Focusing on something
that matters to us makes
us less able to think about
things we care for- Goal
Inhibition

Tunnelling tax: everything bad about tunnelling

Money savings now v/s
monetary benefits later- why
farmers do not take insurances?
BANDWIDTH TAX

Manifestation of tunnelling:
Multitasking: Benefits inside
tunnel but costs outside it

Bandwidth- our computational capacity that involves

cognitive capacity and executive control

Scarcity decreases bandwidth

by decreasing capacity
available for use

Distractions can be both

internal and external

Cognitive capacity- fluid intelligence

trapped by scarcity because of less
availability of bandwidth

Why shouldnt companies

reduce marketing during
lean times?

Scarcity generates
internal disruptions
executive control- how
scarcity affects self
control- marshmallow
experiment

Borrowing And Myopia

Scarcity today creates more scarcity in the future: scarcity makes us borrow
resources to make ends meet in the present without making us realize of greater
scarcity in the future.
Tunnelling Effect: We borrow because we tunnel. We tend to restrict ourselves
only to the current pressing concern and neglect everything else. (hence, a tunnel)
Scarcity in the future fails to capture our attention the way immediate scarcity
does.
In our intense efforts to put off the crisis to some future date, we tend to overlook
bigger impending crisis in future.

It saves us something today even as

it creates greater expenses in future
Does Scarcity lead to Myopia or is Myopia a personal trait?
Many researches have shown that this short-sightedness is a manifestation of the
scarcity mentality and not a personal trait. e.g. Family Feud Experiment
Scarcity is not only in monetary terms. Businessmen treat time as scarce
resource and thus tunnelling effect in terms of time.
Parameters to categorize tasks: Importance and Urgency
We tend to put-off important but non-urgent tasks to a later date, but often end
up on the losing side.
When resources today provide greater benefit than in future, only then
borrowing makes sense.

Scarcity Trap
A situation where a persons behaviour contributes to his/her scarcity.
Conditions contributing to persisting scarcity:
Initial Scarcity
Human behaviour that magnifies it
Why is it difficult to escape?
Because Its Trap!!!
Requires formulating a plan. Planning itself is categorized as an important,
but, non-urgent task. Hence, something that scarcity mindset does not
accommodate.
Juggling Analogy: We focus on the ball which is about to fall and lose track
of the ball which is high in air. Later, this ball comes down and surprises us
just as it is about to fall down.

We tunnel and we neglect. Our bandwidth is taxed,

and we are less far-sighted and more impulsive

POVERTY
Most widespread and important example of scarcity
Poor people more often than not fail to take vaccinations, miss their medicines etc
. This is due to the two negative effects of Tunneling and Bandwidth Tax
Harvest study in India shows that bandwidth tax has an impact of 8-9 points on IQ,
One of the biggest problems so far has been faulty designs of poverty alleviation
schemes. To correct this, changes in the design of the scheme are required.
So far, govt. schemes have largely expected poor to be pro-active and commit no
mistakes.
However under the stress of overtaxed bandwidth and short-sighted view under
tunneling effect, poor conduct many faults (like missing a class), which need to be
incorporated in the scheme
Bandwidth can be built- giving money at the right time.
Policies need to be bandwidth sensitive.