Retirement savings from the behavioural perspective
DOI:
https://doi.org/10.12775/EiP.2009.012Keywords
behavioural economics, retirement savings, intertemporal choice, economical psychologyAbstract
The aim of this article is to point at main implications stemming from behavioural economics for retirement savings. The author presents main models of choice relevant to the intertemporal choice developed by economical psychologists (prospect theory, hyperbolic discount function, system of mental accounts). These models provide a basis for a comparison of behavioural models of choice with fundamental assumptions of the rational representative agent, essential for consumption smoothing models. There is room for doubt whether real individuals are rational, patient and able enough to maintain self-control in order to fulfil the requirements of consumption smoothing models. This comparison allows the author to derive some strict implications for the governmental policy directed to increase retirement savings such as social pensions or optional retirement savings programs which can be perceived as self-commitment devices helpful as devices for maintaining people’s self-control.
References
Akerlof G. A., Yellen J. L., Can small deviations from rationality make significant differences to economic equlibria?, "American Economic Review" 1985, No. 75.
Conlisk J., Why bounded rationality?, "Journal of Economic Literature" 1996, Vol. 34.
Earl P. E., Economics and psychology: a survey, The Economic Journal, September 1990, No. 100.
Frank R., Frames of reference and the quality of life, "The American Economic Review", May 1989, Vol. 79, No. 2.
Kahneman D., Maps of bounded rationality: psychology for behavioral economics, "The American Economic Review", December 2003, Vol. 93, No. 5.
Kahneman D., Wakker P. P., Sarin R., Back to bentham? Explorations of experienced utility, "The Quarterly Journal of Economics", May 1997.
Laibson D., Golden eggs and hyperbolic discounting, "The Quarterly Journal of Economics", May 1997, Vol. 112, No. 2.
Loewenstein G., Prelec D., Anomalies in intertemporal choice: evidence and an interpretation, "The Quarterly Journal of Economics", May 1992.
Madrian B., Shea D., The power of suggestion: inertia in 401 (k)participation and savings behavior, "The Quarterly Journal of Economics", November 2001, No. 116.
Mullainathan S., Thaler R. H., Behavioral economics, MIT Dept, of Economics Working Paper, September 2000, No. 00-27, http://ssrn.com/abstract=245828.
O'Donoghue T., Rabin M., Choice and procrastination, "The Quarterly Journal of Economics", February 2001, Vol. 116, No. 1.
Poterba J. M., Venti S. F., Wise D. A., How retirement saving programs increase saving, "Journal of Economic Perspectives", Fall 1996, Vol. 10, No. 4.
Rabin M., Psychology and economics, "Journal, of Economic Literature", March 1998.
Strotz R. H., Myopia and inconsistency in dynamic utility maximization, "Review of Economic Studies" 1955, No. 3.
Thaler R. H., Psychology and savings policies, "The Ajnerican Economic Review", May 1994, Vol. 84, No. 2.
Thaler R. H., Sherfin H. M., An economic theory of self-control, "The Journal of Political Economy", April 1981, Vol. 89, No. 2.
Thaler R. H., Mental accounting and consumer choice, "Marketing Science", Summer 1985, Vol. 4, No. 3.
Thaler R. H., Anomalies: saving, fungibility, and mental accounts, "Journal of Economic Perspectives", Winter 1990, Vol. 4, No. 1.
Thaler R. H., Sunstein C. R., Libertarian paternalism, "The American Economic Review", May 2003, Vol. 93, No. 2.
Tversky A., Kahneman D., Prospect theory: an analysis of decision under risk, "Econometrica" 1979, No. 47.
Tversky A., Kahneman D., Rational choice andframing of decisions, "The Journal of Business" 1986, Vol. 59, No. 4.
Published
How to Cite
Issue
Section
Stats
Number of views and downloads: 0
Number of citations: 0