How can scarcity be good?
Scarcity seems to increase value.
When we don’t have much of something we need or desire, the bit of it that we do have is savored all the more or we are willing (if able) to pay more to obtain the item.
Examples include: time alone for the parent of toddlers; in demand technical skills that are hard to acquire; luxury goods made on a limited basis; those last hours of summer vacation; the fleeting warmth of a fall day, knowing what lies ahead for the winter months, or the beauty of a fresh fallen snow, knowing that the plows and traffic will soon dirty and destroy it.
Would a never ending supply of cookies be as enjoyable as a limited supply? Not according to a study in 1975 published in the Journal of Personality and Social Psychology:
“Results indicate that (a) cookies in scarce supply were rated as more desirable than cookies in abundant supply; (b) cookies were rated as more valuable when their supply changed from abundant to scarce than when they were constantly scarce; and (c) cookies scarce because of high demand were rated higher than cookies that were scarce because of an accident. With regard to abundance, cookies that were constantly abundant were rated higher than cookies that began scarce but later became abundant.”
Scarcity drives economics and business.
In business and economics, if you have something in abundance that others consider scarce, you stand to move ahead and make a profit, but if your service or product is offered by a multitude of others you have to find other ways to get ahead.
How many advertising campaigns have you seen based on phrases like ‘while supplies last’; ‘limited time only’; ‘call now for this price’ and etc?
Scarcity of things humans need or want can result in technological advances.
Consider all the things that used to be scarce (or expensive), but no longer are.
Food production in the United States has steadily increased as farmers used more and better equipment and materials to coax better yields from their fields. So much so, that even the poor in America are now fat!
Baths for many eons were infrequent or even non-existent (especially during cold weather). Who in the USA now goes many days without a shower? Hot and cold running water are fairly ubiquitous for most of us.
Books used to be so rare that only the religious or powerful elite had access to them. Now they are free on the internet.
Personal computing devices in the home were thousands of dollars in the 1980’s when we got our first system. According to PC Magazine’s PC timeline, the cost in today’s dollars of a PC in 1981 was $7564 people have more computing power in their phone than we had, for much less money.
Scarcity of something in our lives can make us take better care of it.
When I was a young adult in the 1970’s, it was extremely rare to see wildlife, such as deer. Many species of different animals were on the verge of extinction. Concern grew over this and measures were started to ensure survival and re-populate species. Today it is very common, even in suburban neighborhoods to see white-tail deer wandering the streets in the Midwest.
Why is scarcity bad?
Believing something is scarce can cause us to make poor decisions.
Around 2006, according to The psychology of scarcity article on the American Psycological Association’s site, Princeton University psychology Eldar Shafir, PhD, and Harvard University economist Sendhil Mullainathan, PhD, started to explore how people’s minds are less efficient when they feel they lack something — whether it is money, time, calories or even companionship.
In it, the author reports that:
“This scarcity mindset consumes what Shafir calls “mental bandwidth” — brainpower that would otherwise go to less pressing concerns, planning ahead and problem-solving. This deprivation can lead to a life absorbed by preoccupations that impose ongoing cognitive deficits and reinforce self-defeating actions.”
For instance, when someone is financially stressed, they claim, it can cause them to make bad financial choices, such as postponing opening a bill, hoping it will go away and then paying it late and suffering late fees or taking out a payday loan instead of finding a cheaper alternative to get access to the funding.
Holding a scarcity mentality can hold you back.
In Seven Habits of Highly Successful People, author Steven Covey theorizes that people who believe things are scarce don’t do as well as those who have a mentality of plenty.
If you think things are scarce, you may hoard your things, your talent, your contacts and etc. You may refuse to give credit or fail to put forth a great idea for fear it will be stolen. A mentality of plenty, on the other hand, helps you work with others to build on each others ideas and talents; helps you share credit (which helps build your network leading to potential future opportunities) and more.
True scarcity can be harmful to life.
Although we in developed countries have an abundance of goods and services, those in other areas of the world do not. Scarcity to them can mean starvation or death from a curable disease, violence or war. Scarcity of food, water, clean air, medicine and medical services can have severe repercussions.
How has scarcity affected you or your business?