Wednesday, 14 November 2012

Scarce resources – bad decisions

Why is it that we make poor decisions so often? One reason for this is that we are“cognitive misers” who decide on the basis of rules of thumb rather than by really analysing the facts. Another reason is that making many decisions exhausts our willpower. A third reason seems to be scarcity of resources.

Anuj K.Shah from the University of Chicago, Sendhil Mullainathan from Harvard University and Eldar Shafir from Princeton University conducted a series of experiments in which their participants played different games. Some of the participants had to deal with scarce resources, others received abundant resources. These resources were for example the number of shots in a computer game or the time allowed for answering questions in a quiz. In each experiment, there was the opportunity of borrowing the necessary resources at different “interest rates”. It turned out that those with fewer resources made poorer decisions and also borrowed more excessively than those in possession of more resources.

The authors conclude that scarcity draws our attention to one problem and makes us neglect others. According to them, “a scarcity mindset leads people to choose the most locally convenient response to pressing demands”. We become focused on the here and now: We don’t see other problems any more and don’t take the long-term consequences of our actions into consideration. For example, low-income individuals take short-term loans with high interest-rates. Busy people borrow time by taking extensions and focus on the urgent tasks, while losing track of the long-term, important ones.

The original article was published in the journal Science. There is an outline of the study and its implications on the homepage of Science.

One key to understanding our decision-making seems to be attention. Certain circumstances focus our attention in certain ways. When resources are scarce, we focus on dealing with this problem on a short-term basis and forget about other issues. When we have made many decisions, we turn our attention away from the matter we are supposed to decide on and thus make worse decisions. Does being aware of this fact help us override the mentioned mechanisms? Maybe. But we don’t know. As always: Further research is needed!


  1. Some great posts here. This one reminds me of a "decision fatigue" post I've seen where they've studied the impact of a day on the bench with judges.

    Co-creation and collaborative work is an element, I think, of working through some of the limitations of poor decision-making

    The other part is developing awareness of bias and blind spots, and that the past is may be a blind spot of smart decision making in a VUCA future (Volatile, Uncertain, Complex, Ambiguous.)

    1. Thank you! True, developing awaredness of bias and blind spots is certainly important. Do you know "What Intelligence Tests Miss" by Keith E. Stanovich? I wrote two posts on his ideas some time ago: and