August 7, 2008
Many of the most dramatic behavioral economics success stories come from work done in retirement research. Researchers have found, for example, that more workers participate in a 401(k) retirement plan if they are automatically enrolled (with the ability to opt out of the plan) than if they have to make an affirmative decision to participate. Researchers have also found that the number of investment options offered changes how participants allocate their assets, and that cues embedded in employer-based retirement plans as well as entitlement programs like Social Security and Medicare shape people's decision about when to retire. This work has emphasized the power that defaults, framing of decisions, and perceptions of social norms have on how individuals make decisions.
I'll be giving a speech today at the Retirement Research Consortium conference that highlights the important work done in this arena and explores how some of these behavioral economics lessons could potentially be applied to another crucial policy issue-- health care costs and the large portion of those resources that do not result in improved health. The hope is that behavioral researchers will help uncover the same type of policy-relevant insights into improving people's health -- perhaps especially among those on the lowest rungs of the socioeconomic ladder -- as has occurred in retirement saving.