Scarcity Spending

Scarcity is a big economic principle surrounding the basic idea of something being in short supply. For our purposes here, however, we’re going to define scarcity as the “opposite of sticker shock.” Our definitions:

Sticker Shock – Something you experience when you see how expensive things are. When you first move to Alaska, you will experience this. Apples are nearly $3/lb?! (not at Costco, though still more expensive than outside Alaska).

Scarcity – When you leave Alaska and realize everything is so cheap, but those prices will only last until you go back to expensive Alaska!

My first trip to Alaska was when I was 12. I came up with my cousin to visit my aunt who lived on a small island in Southeast Alaska. We flew into Juneau and had to take a ferry for several hours from there to get to the island. My cousin and I lived in the suburbs of Oregon and Washington and had no concept of either sticker shock or scarcity in this context. Upon our arrival in Alaska, we were picked up at the airport by my aunt and a teenage boy from her village. We all went out to lunch in Juneau and my cousin and I learned that they had been out shopping. After lunch, we headed to the ferry dock. Along the way, the teenage boy yelled “I have five dollars left! Pull into that gas station!” He jumped out of the car and quickly returned with a box of donuts. Aboard the ferry, enjoying donuts, we asked questions. Why did you buy so much stuff? Why did we stop for the donuts? My aunt told us that money in Juneau went so much farther than money on the island. When they went to “the city,” they tried to spend every dollar they had. That was the most foreign thing we had ever heard. The next day, we headed to the general store to buy groceries and had our first experience with sticker shock. Milk: $8 – and only available every two weeks if you signed up for a gallon before the shipment arrived.

Last month, we traveled to the Midwest where prices are really low. One expense I did not include in the “notable expenses” of our monthly report was a $45 meal that we purchased within the first few hours of our trip. We made it off the airplane and out of the airport and we were hungry, so we went to a restaurant. It was happy hour so everything was cheap! Half price appetizers! $5 kid meals! Instead of getting a reasonable, frugal amount of food, we participated in what I’m now calling “scarcity spending.” We easily drop $45 on food at an inexpensive restaurant up here in Alaska for the five of us. But look how much farther that money can go in the Midwest! So, we ordered everything. 3 full kids meals (no, they didn’t all finish theirs)! 4 appetizers! A pizza to split! Dessert!

As I looked at the receipt as we walked out to the car, I realized we had just pulled into that gas station to buy the box of crappy donuts because they were cheap. While the food at the restaurant was good, we ordered so much of it because it was cheaper than we were used to. Cheap stuff is scarce! Buy it all now! Luckily, I identified it early in the trip and enjoyed the money-saving prices the Midwest offered rather than participating in any more scarcity spending.

Do you experience scarcity spending in any way?


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scarcity

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16 Comments

  1. Very interesting concept – scarcity spending! I think in a way, I have to bring up the opposite of this (non-scarcity spending?!) since we do live in the state of Oregon and do not have sales tax. Whenever we go outside the state of Oregon, everything seems much more expensive in other states! It’s always complete sticker shock when we go on vacation/work trips, and realize that the same meal out costs close to 2 or 3x the amount we would normally pay because of added tax & higher costs in general! I know that Oregon has higher property taxes & income tax – but on the property front this is something we haven’t quite experienced yet because we do not own (taxes are one thing that still make me head spin and I realize I need to keep learning about). That first meal at your visit to the Midwest must have been quite the treat!

    • MaggieBanks

      Oh my goodness! Being from Oregon and still having no sales tax in Alaska, I can totally relate! WHAT IS THE POINT OF $1.06 STORES?! (sorry, yelling) Dollar stores with sales tax make no sense!

  2. Scarcity spending, how interesting! I’ve experienced that whenever I travelled to the US and the Euro was strong, so shopping there was much cheaper than here in Europe (and American sales are much more aggressive, i.e. reduce their prices by a larger fraction), so I always end up buying clothes that I don’t need… Let’s hope next time I’ll be aware that it’s scarcity spending and not actual need of clothes…

    • MaggieBanks

      It’s tough to ignore the call of “so cheap! must buy ALL the things!” I’m feeling similar going to the UK next summer. When I did a study abroad there, the exchange rate to the pound was WAY worse… now I’m like “well that’s nothing compared to last time.” Trying to remember to reign it in before going there. No scarcity spending because of exchange rates!

  3. Nice, I had never really thought about this concept before. I’ve definitely experienced this when a clothing store is having a big sale (“oh my gosh, V-neck T-shirts are only $7 each; I’d better buy them ALL before they’re gone!”). It’s insanity, because five T-shirts at $7 each is kind of a lot of money…but it’s hard not to feel a sense of urgency if you’re pretty sure this is your *one chance* to take advantage of the deal!

    • MaggieBanks

      Ah yes, the sale scarcity! And salesmen really try to take advantage of this by saying things like “this will only be available until I walk away.” Choose fast! No waiting!

  4. We definitely fall prey to this concept whenever we go into the Dollar Store – the one where everything is $1, same for the $1 bins near the entrance at Target. I’m always like, “what’s a dollar?” but then end up spending over $10 on stuff that is well, you know, not good quality and probably not necessary in our lives, but it was only a $1! Great article and hopefully I’ll remember it the next time I see things are only $1 (or some other ridiculously low price).

    • MaggieBanks

      Oh… I am a sucker for the Target clearance… I try to avoid the dollar section, but if the clearance hits 70% to 90% off, all of a sudden I need ALL THE THINGS!

  5. I’ve experienced this SO many times in the Midwest, haha. My parents used to live in Oklahoma and everything felt so cheap compared to Los Angeles. It’s so hard to not give in and buy everything on the spot. But I love the name you have for it and think that it really puts into perspective how silly it is to feel that way. Operating from a place of financial scarcity (for whatever reason) is never a good idea. Not sure if you listen to podcasts, but So Money (http://podcast.farnoosh.tv) had a few really interesting interviews about all of this and overcoming the financial “script” of scarcity that society feeds us. Super interesting!

    • MaggieBanks

      I love podcasts (when my kids let me listen to them!). I’m sure you know exactly what I’m talking about going from L.A. to the Midwest. I bet your cost of living is even higher than ours!

  6. Oh I definitely feel the scarcity spending! Or what I think of as the “it’s cheap, let’s buy lots of it” phenomenon that I experience at flea markets and discount stores. Oh the piles of crap I bought during my flea marketing years, just because it seemed like a “deal” or like it was worth that cheap price. Now I have trained myself to consider the question, “Would I buy this for five times the price?” (I change the number, depending.) If the answer is yes, then it’s worth considering. But I feel like it helps me tell if I’m just falling prey to the cheapness effect, which I will hereafter call scarcity spending. 🙂

    • MaggieBanks

      Flea markets… I could totally have gotten into that in my previous days! Luckily we never lived near one. Saved ourselves so many “Deals!”

  7. Kim from Philadelphia

    Maggie- so true!!
    This phenomenon was so true of me and The Dollar Store! Though I mostly avoided junk, I certainly purchased way more than we needed. Especially fancy osier napkins when we use cloth. Just because they were cute “and cheap”
    I’ve tried to be more mi soul of my spending- even at Costco- because I can really go nuts there!

    I wish I could teleport goods from our local Trader Joes to you (we have one 4 miles away!!!)

    • MaggieBanks

      I wish you could teleport stuff here as well. My daughter just convinced me yesterday that we needed to get a teleporter so that she could swing by relatives’ houses in other states on the way home from school. And we could go see the Eiffel Tower after dinner. I was on board!

      • Jaime Grimes

        Maggie my 4 kids and I just moved to Fairbanks in September. Sticker shock doesn’t quite cover it! Even though I researched the area before I moved I’m still in need of a defibrillator every time I go to the grocery store!

        • MaggieBanks

          Sometimes there are deals, but yes, for the most part, things are pretty steep. 🙂

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