Bandwidth, in the context of Scarcity, refers to the cognitive resources that an individual has available for processing information, making decisions, and controlling impulses. A person’s bandwidth can be diminished by the mental load of managing scarcity, leading to reduced cognitive capacity and effectiveness in various areas of life. It is analogous to the amount of mental energy or attention one has at their disposal at any given time.

The bandwidth tax is the cognitive load imposed by scarcity, which consumes mental resources and reduces an individual’s available bandwidth. This tax can lead to poorer decision-making, decreased self-control, and a diminished ability to process information and solve problems. It effectively taxes the mind’s capacity to think, plan, and execute tasks efficiently.

Behavioral economics is a field of study that combines insights from psychology and economics to understand how people actually make decisions, including how they spend, save, and perceive value. It challenges the traditional economic assumption of rational decision-making by highlighting how cognitive biases, emotions, and social factors influence economic behavior.