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What mistakes do people make when they don't have enough?

Do you ever buy too many socks when they’re on sale? Have you kept going back to a friend who wasn’t good for you because you felt there was no one else who would understand you like that again? Have you really wanted a piece of designer clothing because there weren’t many made?

If you have, you’ve experienced and been persuaded by the psychological effects of scarcity.

I first read about scarcity in the book Scarcity: Why having too little means so much. It opened my eyes because until this book I had viewed many unpleasant behaviours as the problem vs. symptoms of a larger one - not having enough.

To fully understand the next few weeks talking about the psychology of money, you need to understand the economic concepts of scarcity and abundance.

Today we’ll be focusing on scarcity, specifically a scarcity mindset, the mistakes you might be making if you’re in one and six tips to get yourself to snap out of it.

What is scarcity?

Scarcity refers to a fundamental economic concept that arises from the inherent limitation of resources in comparison to unlimited human wants and needs. In other words, it is the condition in which available resources are insufficient to satisfy all the desires and demands of individuals and society as a whole.

Scarcity exists because resources such as time, money, natural resources, labour, and technology are finite, while people's wants and needs are virtually boundless. As a result, individuals, businesses, and governments must make choices about how to allocate these scarce resources effectively.

Because of scarcity, trade-offs and choices become necessary. When resources are allocated to one particular use or purpose, they become unavailable for other potential uses (this is where opportunity cost and loss aversion comes into play). For example, if you buy Netflix, you might not have the time to watch or the money to buy Amazon Prime too.

How do people in scarce situations behave?

Scarcity plays a crucial role in economics as it drives the study of how people, businesses, and societies make decisions about resource allocation to maximise their well-being and achieve their goals. We hate not having enough.

In situations of scarcity, most people tend to make mistakes because of the behavioural and psychological effects of scarcity which can include (but is not limited to):

  • Competitiveness - competition over friends or money can drive people to fight for things leaving not enough for others. This pattern can continue even when the person does have 'enough' because they fear not having again which can lead to social tensions and conflict and...

  • Hoarding or Stockpiling - this isn't only for objects, in a situation where someone feels they don't have enough love they could keep too many friends

  • Conservation and Frugality/ over compensation - a good way to think of this is people on a diet. When calories are scarce they begin to go for salads, however this behaviour becomes disruptive if only salads are eaten because it's likely the caloric intake will fall below the body's minimum requirements and damage hormones

  • Desperation and Risk-Taking - when people are driven to get something they need they might take immoral measures to get there which with have long-term consequences

  • Long-Term Planning: Scarcity often encourages long-term planning and future-oriented thinking to prepare for potential shortages - but only towards the object of fixation

Of course, people’s reactions may vary, but scarcity increases the chances of these behaviours significantly. If the root of what is scarce isn’t addressed as early as possible, the symptoms become worse.

You can see how this problem and the behaviours associated affects populations at large with widening wealth gaps, but know these behaviours can help you avoid them and fix or at least understand where you feel you have scarcity in your life.

Before we get to the end, did you enjoy this post?

Make sure you subscribe to my email list so you don't miss next week's post, and thank you from the bottom of my heart for reading!

Next week we'll explore the psychology of abundance.

Getting out of a scarcity mindset isn’t easy, but growth never is, here are six places to start:


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