The Bandwidth Tax: Scarcity Makes You ‘Dumber’

We commonly think of poverty as a shortage of money, or busyness as a shortage of time. But research suggests that scarcity of all varieties leads to a shortage of a critical mental resource we call bandwidth. Bandwidth measures our computational capacity, including our ability to pay attention, make good decisions, stick to plans, and resist temptation.

A Cognitive Load as Loud as a Train

When an individual is dealing with financial troubles, their quiet office is suddenly filled with “noisy trains of thought,” constantly rumbling with personal concerns like making the mortgage payment. These internal distractions consume mental bandwidth.

Studies confirm that scarcity directly reduces bandwidth. When low-income subjects in a New Jersey mall were primed with easy financial problems, they performed similarly to well-off subjects on fluid intelligence tests. But when primed with an expensive, difficult $3,000 car service issue, the poorer subjects performed significantly worse.

More Impairing Than An All-Nighter

The cognitive decline observed in the poor after contemplating a difficult scenario was substantial. Measured on the Raven’s Progressive Matrices test (a measure of fluid intelligence), this effect corresponded to a reduction of 13 to 14 IQ points.

Our study revealed that simply raising monetary concerns for the poor erodes cognitive performance even more than being seriously sleep deprived.

This reduction is not due to the person being inherently less capable; rather, their effective bandwidth is taxed because part of their mind is captured by scarcity. Scarcity also reduces executive control, which underlies self-control, making people more impulsive and less able to inhibit automatic responses.

The Farmers’ Fluid Intelligence

This isn’t just an effect triggered in a lab. Farmers in India, who receive their income in a lump sum after harvest, are cash-poor before harvest and rich afterward. The same farmer performed much worse on tests of fluid intelligence and executive control when they were poor (preharvest) than when they were rich (postharvest), corresponding to a reduction of about 9 or 10 IQ points. This proves that the state of poverty itself taxes the mind.