Princeton University

To study how the psychology of scarcity and slack has implications for behavioral and traditional economics

  • Amount $577,544
  • City Princeton, NJ
  • Investigator Eldar Shafir
  • Initiative Behavioral Economics and Household Finance (BEHF)
  • Year 2014
  • Program Research
  • Sub-program Economic Institutions, Behavior, & Performance

Funds from this grant support a series of surveys, tests, and experiments by Princeton behavioral psychologist Eldar Shafir that examine scarcity and its implications for the social and behavioral sciences.  Findings to date suggest that how closely people’s behavior complies with standard economic models of rationality depends interestingly on the constraints they face when making decisions.  Shafir has found that those who are poor (or put into an experimental situation of scarcity) often act more like the rational “homo economicus” posited by normative economic theorists.  In contrast, those who are rich (or who are put into an experimental situation of plenty) often exhibit curious biases and behavioral anomalies that deviate from what standard economic models predict.  Abundance, Shafir’s research suggests, makes inconsistency and irrationality more affordable.  The findings stand in stark contrast to the widespread belief that those in poverty make poor economic decisions.  The truth may be exactly the reverse. This grant will fund the continuation and expansion of Shafir’s research over the next three years, allowing deeper investigation of what factors explain behavioral deviation from traditional economic models and the implication for the design and implementation of policy interventions. 

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