Understanding the decision-making process is the cornerstone of better policy interventions. Broadly, poverty has focussed on systemic factors, individual factors, environmental pressures or a combination of the three. However, another side of the story remains relatively less understood – the causal effects of poverty that change the decision-making process itself. A rapidly emerging debate between policymakers brings forth this fourth perspective. Within this framework, the shortfall of resources or poverty changes cognitive systems that ultimately affect the decision. At first glance, low pickup rates of preventative health, medications or high-interest borrowing behaviours of the poor seem actively self–sabotaging. Looking closer, they seem natural fallouts of the easily activated, challenging to suppress, interfering monetary thoughts that shape valuations and associations. Scarcity or the feeling of having less than one needs alters the decision-making process in itself. This sensitivity to 'what matters' changes preferences. Poverty triggered mechanisms make economic decisions more difficult by curtailing cognitive control.
The involuntary load presses the processing into redirecting the slower, deliberative system two towards what needs to be taken care of immediately. At the same time, other preferences get overwhelmingly guided by the faster, affective system—such recalibration in preference construction results in the rational-bias split or tunnelling. Our work is an inquiry into this dichotomy of risk preferences. We use the two-period natural harvest cycle combined with the priming of financial worries to study the decision-attribute dependent loss and risk aversion of farmers in 800 people sample from Bwikhonge in Uganda for gains and losses in a between-within subject design. We explain the process that begins involuntarily with scarcity has psychological implications and bifurcates the two aversions. For choices that resolve the scarcity at hand, we find more expected utility consistent decisions. We hypothesise participants to exhibit lower risk aversion and loss aversion for scarcity relevant decisions. In contrast, the two increase for irrelevant choices.