Editor’s note: This week we’re proud to launch the first of our streams of curated content. These streams will introduce readers to different areas of judgment and decision making psychology, with our sub-editors bringing us their expertise in the topic. Each series will kick off with an introduction to the area, followed by a range of content such as interviews and posts discussing different topics. This first one on the impact of resource scarcity on decision making will be curated by Caroline Roux from Kellogg School of Management at Northwestern University and Shereen Chaudhry from Carnegie Mellon University.  

“Whether we live in resource-poor circumstances or resource-rich ones, even if we’re loaded with more money or goods or everything you could possibly dream of wanting or needing, we live with scarcity as an underlying assumption. It is an unquestioned, sometimes even unspoken, defining condition of life.” – Twist and Barker (2006), The Soul of Money

No matter whether we live in a resource-rich or a resource-poor environment, we are surrounded by reminders that resources may be insufficient to satisfy demand, which often inhibit us from acting on our needs and desires. Scarcity thus has important consequences on people’s judgment and decision making. Marketers have understood the appeal of scarcity for quite some time and have used it to sway consumers to want things more. There are however many other consequences to being exposed to scarcity-related cues or to living in scarce environments, which we are only beginning to understand. For instance, why are people willing to do all kinds of crazy things to get their hands on the best deals of the year? Why do poor people seem to always be making bad decisions (and are they really)? Scarcity seems to be a unique source of decision making errors and tendencies, which this series will attempt to unpack and explain.

More generally, living in deprived circumstances can also exacerbate the effects of many other psychological motivations and cognitive biases. The desire to buy status-related items is equally strong in, but more detrimental for, individuals who can hardly afford to buy staple goods. While we all struggle with self-control and saving for the future, payday loans appear most attractive to people in the lowest income brackets, the people least able to afford the astronomical interest rates. Aware of the challenges that people living under extreme resource scarcity face, organizations like “Innovations for Poverty Action” and the “Corporation for Enterprise Development” are beginning to address such issues by leveraging lessons from the fields of judgment and decision making, as well as behavioral economics.

In this series, we will present findings from behavioral research that helps better understand different consequences of resource scarcity. On the one hand, Shereen will take a “behavioral engineering” approach and present applications that help improve the lives of people living in poverty or developing countries, as well as other populations for which errors in human judgment and decision making are especially detrimental. Caroline, on the other hand, will present findings from different fields related to judgment and decision making to help explain the influence of scarcity in our everyday lives. We will cover a wide range of scarcity-related topics that will hopefully be of interest to you, readers of this blog, and we hope to stir your interest in this flourishing and fascinating field of research.