Re: The Indeterminacy of Individual Economic Actions
Brian Doss wrote: My intuition agrees with you, at least given a five year time-scale. That is, if the default was to stay in SS, and people had to send in some form to opt out, then within a few years most people would, even though they won't do a similar think regarding their companies plan. This, with the default-as-informative-endorsement theory, suggests that people trust their government less than their company. It's not necessarily an issue of less trust- it could be that people easily see that SS is a poor investment (low or negative rate of return) and thus decide to opt out. No doubt that some will opt out because of the trust factor, but I think given the amount of information available on social security, people would be making more informed choices than simply reacting to gut "I dont trust you" instincts. Let us say that "opt out" means that you don't get any benefits, and your contribution is reduced down to the level required to maintain the current inter-generational redistribution. This is what I had in mind, but should have said. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030 703-993-2326 FAX: 703-993-2323
Re: The Indeterminacy of Individual Economic Actions
What does this say about the economists model of human behavior? -- Bill Dickens "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior" findings. First, 401(k) participation is significantly higher under automatic enrollment. Second, the default contribution rate and investment allocation chosen by the company under automatic enrollment has a strong influence on the savings behavior of 401(k) participants. These findings do not change the economic model of homo economicus, economizing man. It takes effort and time to make changes and gather information, so inertia is to be expected. Optimality is subjective rather than being based on objective rewards. The reasons for anchoring (being stuck on certain concepts even though not objectively true or optimal) and information bias are the subject area of psychology rather than economics. Fred Foldvary
Re: The Indeterminacy of Individual Economic Actions
Since their wasteful government continues to exist; even as wasteful companies wither away this observation holds much appeal to me. -Original Message- From: Robin Hanson [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Tuesday, July 25, 2000 12:42 PM Subject: Re: The Indeterminacy of Individual Economic Actions Bryan Caplan wrote: It also suggests that most people might stay with social security if it were made voluntary - at least for a while. This is a really neat point, especially because I'm pretty sure it's wrong. I can't imagine many people who are already comfortable with personal investing sticking with SS. At least measured in dollars rather than people, I'd expect more than 50% pullout from SS within a year. My intuition agrees with you, at least given a five year time-scale. That is, if the default was to stay in SS, and people had to send in some form to opt out, then within a few years most people would, even though they won't do a similar think regarding their companies plan. This, with the default-as-informative-endorsement theory, suggests that people trust their government less than their company. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030 703-993-2326 FAX: 703-993-2323
