When people feel that their resources are scarce -- that they don't have enough money or time to meet their needs -- they often make decisions that favor short-term gains over long-term benefits. Because of that, researchers have argued that scarcity pushes people to make myopic, impulsive decisions. But a study provides support for a different, less widely held view: People experiencing scarcity make reasonable decisions based on their circumstances, and only prioritize short-term benefits over long-term gains when scarcity threatens their more immediate needs.
When people feel that their resources are scarce -- that they don't have enough money or time to meet their needs -- they often make decisions that favor short-term gains over long-term benefits. Because of that, researchers have argued that scarcity pushes people to make myopic, impulsive decisions.
"Needs exist across a broad time horizon," said Tully."We often think about immediate needs like food or shelter, but people can experience scarcity related to future needs, too, such as replacing a run-down car before it dies, buying a house or paying for college. Yet research on scarcity has focused almost exclusively on immediate needs."
Overall, they found that when people feel that they don't have enough resources to meet an immediate need, such as food or shelter, they are more likely to make decisions that offer an immediate payout, even if it comes at the expense of receiving a larger payout later.
In a follow-up experiment, the researchers found that the time horizon effect only influenced participants' choices when the payout was relevant to the threatened need, suggesting that the decisions reflected participants' deliberate attempts to meet the threatened need. In other words, when participants felt short on money for an immediate need, they were more likely to choose a smaller, quicker cash payout, compared with when they felt short on money for a long-term need.
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