Editor's Note: This story originally appeared on Boldin.
The scarcity mindset is the fear that there’s never enough — whether it’s money, time, or resources.
In “Scarcity: Why Having Too Little Means So Much,” Sendhil Mullainathan, a Harvard economist and winner of a MacArthur grant, and Eldar Shafir, a psychologist at Princeton University, explore how a lack of resources — whether money, time, or even social connection — impacts our thinking and decision-making.
They argue that scarcity doesn’t just cause stress; it actually changes how we process information, leading to cognitive “tunnel vision” that keeps us from escaping from what we lack.
While it may seem counterintuitive, when we have very little of something, we sometimes make choices that impair that precious resource even further — often by choosing to gain some of it in the short term, which inevitably steals away even more of it in the long term.
A scarcity mindset actually reduces mental capacity, increases impulsivity, and leads to a cycle of poor decision-making.
How a scarcity mindset can lead to poor decision-making
You’re busy. There are meetings to attend, important emails unread, and looming deadlines that seem more and more impossible with each passing day. You may feel like you have no time to yourself and are doing everything in your power to just keep your head above water.
And then your car starts to make a noise. You ignore it. Then it starts to shake a little when you accelerate. You ignore it. After all, you just don’t have the time to worry about it.
It doesn’t go away. In fact, not only does it not go away, it just gets louder and starts shaking more violently, until finally it makes a horrendous sound and stops running altogether.
You get stranded on the side of the road and need to call a tow truck, wait for said tow truck, get over to the shop, and get a rental car. You generally spend a lot of precious time.
If you had just taken the car to the shop when you heard that first strange sound, you probably would have saved yourself some money. But more importantly, you would have saved yourself a ton of time … that resource that you were trying to gain by ignoring your car’s issues in the first place.
Now, let’s take a look at the key takeaways from “Scarcity.”
1. A scarcity mindset puts the attention on what you lack
The authors’ core idea is that scarcity captures the mind’s attention and forces people to focus intensely on their immediate lack. This can be money, time, or even social relationships.
And, when your brain is focused on what it lacks, it often neglects to move you toward decisions that get you where you actually want to be.
For example:
- The wealthy sometimes focus on growing wealth instead of living the life they want. Or they hoard savings out of fear, even when they have more than enough.
- Parents of teenagers often focus on the kids’ laziness at home, instead of their focus and initiative at school.
- The time-starved overcommit and then struggle to prioritize effectively.
- Dieters obsess over food, which paradoxically makes it harder to eat healthily. (I’ve seen people on diets worry way more about food than someone on cruise control with their meals. What’s worse? In experiments, dieters performed worse on cognitive tests because their mental energy was consumed by thoughts of eating.)
A better way to focus: Be grateful for what you have and put your focus on where you want to be: growing wealth, being healthy, retiring, having ease in your life.
When you are focused on what you want instead of on the problems you have, your subconscious starts to work in your favor instead of against you.
2. Scarcity focuses attention on the near term, not the long term
The intense focus of a scarcity mindset can sometimes be beneficial (helping people solve urgent problems). However, it more often leads to tunnel vision, where people neglect broader, long-term goals.
The authors explain the tunneling trap, a cognitive effect where people under a scarcity mindset focus too much on immediate concerns and neglect future consequences.
This leads to a cycle where people constantly solve one crisis at a time, never getting ahead financially or in other areas of life.
Scarcity narrows attention, often leading to reactive rather than proactive decision-making. Examples:
- A person struggling with bills might take a payday loan to get through the week, ignoring the high-interest burden it creates for future weeks.
- A busy professional constantly reacts to urgent emails instead of working on strategic long-term projects.
3. The bandwidth tax
Beyond making it hard to plan for the long term, a scarcity mindset reduces cognitive bandwidth — the mental resources available for problem-solving, decision-making, and impulse control.
Example:
- Experiments show that financial stress alone lowers IQ by 13-14 points, similar to the effects of sleep deprivation. When people constantly worry about money or time, their mental capacity is drained, leaving them with diminished abilities to make good decisions.
- A financially struggling person may forget to pay bills because their mental energy is spent worrying about making ends meet.
- Someone lacking time may be more forgetful and impulsive, missing deadlines or making rushed choices.
Scarcity literally makes people less capable of making good decisions by consuming mental bandwidth.
Tips for increasing mental bandwidth: Automate as much of your decision-making as possible. You can reduce cognitive load by automating financial, work, or health decisions (e.g., automatic bill payments, meal planning, etc.).
4. You need some slack in your life
People experiencing scarcity lack slack, meaning even small shocks (a flat tire, a missed deadline) can cause major disruptions.
Without slack, people living in scarcity are far more vulnerable to setbacks.
- Financial slack means having emergency savings to cover surprise expenses.
- Time slack means having buffer time to handle urgent tasks without derailing other priorities.
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