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The Economics of Bandwidth

The scarcity mindset helps us focus but also taxes our resources.

You can’t always get what you want.

- The Rolling Stones

As we usually think of it, scarcity is the economic problem of having unlimited human wants and needs in a world of limited resources. We have a growing scarcity of non-renewable energy, such as fossil fuels. Many in the world suffer shortages of food, reflecting complex geopolitical dynamics. In the aftermath of our recent recession, many of us have felt a straightforward scarcity of funds. Scarcity is not only an economic problem, however. We also face a scarcity of psychological resources. There are limits to how much we can effectively manage. We have limited bandwidth.

In their new book, Scarcity: Why Having Too Little Means So Much, behavioral economist Sendhil Mullainathan and cognitive psychologist Eldar Shafir offer an intriguing account of our subjective experience of scarcity. Their definition of scarcity is simple: it is having less than you feel you need. They offer a hypothesis: scarcity captures the mind. They argue that we interpret the world differently when operating from a scarcity mindset. Sendhil and Mullainathan recount numerous studies illustrating their claim. In one, half a group of subjects was asked to come to a lab during lunchtime, without having eaten; another half came after eating lunch. Both groups then completed a task where they watched a screen projecting a word, such as TAKE or RAKE. The word flashed on the screen for only 1/30th of a second and the subjects were asked to correctly recall the word. They found that both groups–the hungry and the fed–did equally well on this task, except when words related to food (e.g., CAKE) were involved. The hungry subjects did much better than their non-hungry counterparts. Scarcity had captured their attention. In another example, with somewhat surprising findings, they shared evidence of how lonely individuals are more attuned to the facial expressions of others than non-lonely individuals. The implication is that the lonely, facing a paucity of social contacts, are more strongly motivated to tune into the social features of others (presumably to satiate feelings of loneliness).

What makes Sendhil and Mullainathan’s analysis innovative is their focus on the phenomenology of scarcity–complete with its benefits and costs. While scarcity of cognitive resources is ubiquitous, the feeling of scarcity is not. There are also advantages to some experiences of scarcity. When we face an acute scarcity of time, as with an imminent deadline, our motivation can soar. As they point out, imaginary deadlines (like the ones we might impose on ourselves in the form of “to do” lists) never quite capture our attention in the way that real deadlines do.

Our single-mindedness can cause us to neglect things that might matter most to us. Sendhil and Mullainathan propose that scarcity imposes a kind of bandwidth tax on us. The poor are not just short on cash; they are often short on bandwidth. Faced with pressures to take care of basic human needs, there may be reduced cognitive capacities for the demands of work, parenting, and self-care. Similarly, a time-taxed professional–filling the day with back-to-back meetings and appointments, may experience his or her own cognitive load and suffer similar personal setbacks. Scarcity, in other words, is an equal opportunity malady.

Whether we are scarce on money or on time, we can inoculate ourselves somewhat from scarcity’s effects. Sendhil and Mullainathan suggest that we budget in slack to mitigate the effects of potential shocks (either to our budget or our schedule). Having slack helps us to feel abundance, which counteracts the scarcity mindset. We can also economize on our bandwidth. Unlike our devices, we cannot easily upgrade our cortical processors. We can, however, become more economical in how we deploy our cognitive resources.

In his collection of essays on love, Freud wrote that, “...the psychical significance of a drive rises in proportion to its frustration.” What we value, or desire, increases in proportion to our sense of its lack. Scarcity, in the Freudian view, is interwoven with desire. Scarcity fuels our appetites and keeps us absorbed by what we lack.

© 2013, Bruce C. Poulsen, All Rights Reserved.