Home > Free Essays > Economics > Economic Problems > Scarcity, Decision-Making, and Macroeconomics
Cite this

Scarcity, Decision-Making, and Macroeconomics Essay


Scarcity is the problem that the vast majority of citizens of practically every country in the world suffer from. Such issues as pressing needs, financial obstacles, and absence of support tend to have a substantial impact on one’s personal development and an overall way of living. The inability to concentrate on a particular task due to distractive thoughts about an ill parent/child or the need to make provision for a family usually plays a huge disservice in the matters of general work performance. It is evident that the person facing no serious financial hardships appears to be a more productive worker than the one having those. Regarding the nature of scarcity, Liodakis points out that it arrives as a direct reflection of various political, economic, and socio-ecological crises that humanity has been encountering throughout its history (221). Many people today become caught by a debt pit, which empties all the available savings and leaves no room for a trouble-free existence.

Effect of Scarcity on “Bandwidth”

To begin with, the term “bandwidth” was first introduced by Sendhil Mullainathan and Eldar Shafir to define human ability to manage various activities. As stated in their book, “bandwidth refers to our cognitive capacity and our ability to pay attention, make good decisions, stick with our plans, and resist temptations” (Mullainathan and Shafir 60). The researchers point out that a person’s ability to make judgments and decisions can be seriously influenced by such a concept as scarcity. The experiment that the scholars have conducted on farmers in India has shown that the same individuals demonstrate different results of brain activity depending on their financial/material situation. Thus, the bandwidth was measured twice: before and after harvest. In the period before harvest farmers were exposed to higher irritation and showed poorer intellectual abilities. However, the situation changed to the direct opposite after the harvest had been gathered. People could solve more complex tasks and easily coped with the tests based on Raven’s matrices. The experiment has proven that scarcity does affect the human ability to think rationally.

Regarding my educational goals, scarcity was a crucial factor to determine my vision of the future and help with the choice of profession. I clearly realized that I needed higher education to succeed financially. While still being a student of a high school I made a strict decision to study business and economics to alleviate the hardships our family had to deal with as long as I had been studying at school. Now as a college student I believe that my current profession will allow me to acquire a job that will solve my issues once and for all. In order to get a required experience, I am ready to work part-time as long as my schedule permits me to.

Impact of Scarcity on Macroeconomics

Eventually, being poor requires using more mental resources compared to well-to-do people. Regarding the state economies, a scarcity mindset of the key political and economic figures leads to much higher mistakes’ occurrence and less effective decision-making in comparison to governments with bigger financial cushions (Gennetian and Shafir 905). When having an insufficient amount of resources, industrial organizations are exposed to the need for making concessions and operating on less beneficial conditions, which then leads to a decline in incomes. As Gennetian and Shafir point out, “suboptimal decisions are often the result of a specific mindset created by the demands and circumstances of poverty” (907). These decisions tend to have a negative impact on organizational performance and the overall productivity of the industrial sector. Moreover, they often lead to an increase in unemployment rates since companies are forced to reduce staff due to an unstable economic situation.

In order to alleviate the disruptive effect of a scarcity mindset, the U.S. Federal Government needs to create a favorable environment for every citizen to achieve a desired level of well-being. For that purpose to be reached, some significant changes in taxation policy need to be made for a private sector to show a streaming increase in entrepreneurs’ quantity. It is recommended that newly arriving companies are relieved of the need to pay general taxation during the first year of operation. Such measures would allow one to substantially reduce unemployment and stimulate a home-based production of goods. With these changes being applied, the problem of a scarcity mindset would be resolved once and for all.


The research provides enough evidence to the fact that scarcity is the problem creating plenty of obstacles on one’s way to goals’ achievement. People who are exposed to dealing with financial and personal issues tend to think and behave differently compared to those having no such concerns. The same approach applies to economics: a scarcity mindset of a government staff leads to a whole variety of negative consequences and may even result in a decline in the economic sector. For that not to happen, the Federal Government needs to resort to the new measures of problem elimination and provide an effective taxation policy for regular citizens to finally change a given mindset.

Works Cited

Gennetian, Lisa A., and Eldar Shafir. “The Persistence of Poverty in the Context of Financial Instability: A Behavioral Perspective.” Journal of Policy Analysis and Management , vol. 34, no. 4, 2015, pp. 904-936.

Liodakis, George. “An Exploration of Scarcity in Historical Perspective.” Science & Society, vol. 80, no. 2, 2016, pp. 221-247.

Mullainathan, Sendhil, and Eldar Shafir. Scarcity: Why Having Too Little Means So Much. Macmillan, 2013.

This essay on Scarcity, Decision-Making, and Macroeconomics was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.
Removal Request
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda.
Request the removal

Need a custom Essay sample written from scratch by
professional specifically for you?

Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar

certified writers online

Cite This paper

Select a referencing style:


IvyPanda. (2020, September 1). Scarcity, Decision-Making, and Macroeconomics. Retrieved from https://ivypanda.com/essays/scarcity-decision-making-and-macroeconomics/

Work Cited

"Scarcity, Decision-Making, and Macroeconomics." IvyPanda, 1 Sept. 2020, ivypanda.com/essays/scarcity-decision-making-and-macroeconomics/.

1. IvyPanda. "Scarcity, Decision-Making, and Macroeconomics." September 1, 2020. https://ivypanda.com/essays/scarcity-decision-making-and-macroeconomics/.


IvyPanda. "Scarcity, Decision-Making, and Macroeconomics." September 1, 2020. https://ivypanda.com/essays/scarcity-decision-making-and-macroeconomics/.


IvyPanda. 2020. "Scarcity, Decision-Making, and Macroeconomics." September 1, 2020. https://ivypanda.com/essays/scarcity-decision-making-and-macroeconomics/.


IvyPanda. (2020) 'Scarcity, Decision-Making, and Macroeconomics'. 1 September.

More related papers
Pss... Stuck with your
assignment? 😱
Pss... Stuck with your assignment? 😱
Do you need an essay to be done?
What type of assignment 📝 do you need?
How many pages (words) do you need? Let's see if we can help you!