We recently attended a talk by behavioural scientist Eldar Shafir (an advisor to the behavioural insights consultancy ideas42). Shafir and his colleague Sendhil Mullainathan have spent the last eight years researching the impact of 'scarcity' on our cognitive capacity.
Their intuitive theory is that when something we need is scarce, such as money or time, our attention becomes unduly "tunnelled" - we become preoccupied with a particular issue and ignore other important things we also need to pay attention to.
But crucially, they have found that scarcity can reduce our 'mental bandwidth' and we actually have less cognitive capacity at our fingertips so we are more prone to make mistakes and bad decisions - which may even make the problem worse in the long term.
Their research shows that financial strain can severely impair cognitive capacity - with one study showing less well-off people performed poorly on cognitive tasks in response to a large financial stressor - their IQ dropping by 13 points!
What are the implications for research and for behaviour change interventions?
a) In Shafir's words, when designing behavioural interventions, "We need to design life's cockpit with scarcity and mental bandwidth in mind".
b) We also need to keep in mind the holistic implications of increasing bandwidth using behavioural interventions and design. For example, designing a bank account which helps the poor manage their money more easily - like the new Even app or Squirrel financial service does - might mean the poor have more mental bandwidth to focus on other things - Shafir mentioned better parenting.
To read more about their research, see this article or you can buy their book 'Scarcity' here. The authors also discuss their research in this video here at a talk at The Aspen Institute.
