Scarcity makes people wiser?

We tend to be economically irrational when it comes to choosing how we use resources like money and time but scarcity can convert us into economically rational decision makers.

"When money is short, the utility bill and rent payment are on the top of one's mind," said lead researcher Anuj Shah of the University of Chicago.

This makes trade-offs particularly salient. After all, paying for one thing means we can't pay for something else.

"Someone contemplating purchasing a beer compares the beer with other budgetary demands, like tomorrow's lunch or bus fare. And these trade-offs do not depend on where the beer is purchased," Shah, a psychological scientist at University of Chicago Booth School of Business, said.

Shah and his colleagues hypothesised that people experiencing a scarcity mindset would be more attuned to tradeoffs rather than context and would, as such, evaluate goods in a more stable, consistent way than people who aren't faced with scarcity.

In the study, high-income participants were willing to pay more for a beer from a "fancy resort hotel" than for the same beer from a "small, run-down grocery store," but the amount lower-income participants were willing to pay didn't vary according to where the beer was purchased.

Additional data indicated that scarcity also influences decisions we make regarding resources other than money, including food and time.

These findings suggest that a condition of scarcity - such as being on a diet or feeling time-pressured - disposes people to think more consistently about the value of the resource in question, regardless of other contextual factors.

The findings appeared in Psychological Science