graphrix_IHB
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<a href="http://www.project-syndicate.org/commentary/shiller55/English">Robert Shiller writes about an automatic savings plan</a>. And, a way to opt out. Hat tip <a href="http://economistsview.typepad.com/economistsview/2008/01/links-for-20-26.html">Dr. Thoma of the economist's view</a> for the linky.
<em>
People are fascinated by wealth. They enjoy watching the wealthy, savoring the thought of their fine homes, luxurious vacations, fancy cars, and gourmet dining. But if you infer from this that people spend a lot of time planning the lifetime accumulation of their own wealth, you would be wrong. </em>
<p><em>Most people do not seem to think very hard about how much to save from their income, or about how big the differences in their wealth could be in their later years if they just adjusted their saving rate today. Most people just pay off their mortgage, make the mandatory contributions to their state or private pension (if they have one), and keep some money for short-run contingencies. That’s about it. </em></p>
<p><em>The economist Frank Ramsey, in a famous article published in 1928, said that people have a “weakness of the imagination” about how their actions today affect their own future. He said that if people thought about it correctly, they might well conclude that they should save half their income. That way, the accumulated wealth might make them very happy in their later years. But, mostly, they don’t even think about that possibility. </em></p>
<p><em>Richard Thaler, a contemporary economist, spoke in 1980 of an “endowment effect.” Even though people may admire other things, they act as if they are mostly happy enough with whatever they already have, and lack the will to consider real change.</em> </p>
I am not one for government forced savings, but after studying the endowment effect, and the housing bubble, I clearly think some sort of savings plan needs to be implemented. I have to agree with Shiller, if there was a plan that required someone to opt out, then only a few would actually do so.
Shiller, has written about the <a href="http://cowles.econ.yale.edu/P/cd/d14b/d1459.pdf">wealth effect</a>, on more than <a href="http://cowles.econ.yale.edu/P/cd/d13a/d1335.pdf">one occasion</a>, and I have several papers, written by well known authors, on the endowment effect. That is in case anyone is interested in discussing and researching the topic further, and I can upload the papers for anyone here to read. Even this lesser known author, wrote a paper on the psychology of the housing bubble, that cites the endowment effect. IMO, it is a major contributor the housing bubble, and in many ways, I have suffered from the effects of it myself.
<em>
People are fascinated by wealth. They enjoy watching the wealthy, savoring the thought of their fine homes, luxurious vacations, fancy cars, and gourmet dining. But if you infer from this that people spend a lot of time planning the lifetime accumulation of their own wealth, you would be wrong. </em>
<p><em>Most people do not seem to think very hard about how much to save from their income, or about how big the differences in their wealth could be in their later years if they just adjusted their saving rate today. Most people just pay off their mortgage, make the mandatory contributions to their state or private pension (if they have one), and keep some money for short-run contingencies. That’s about it. </em></p>
<p><em>The economist Frank Ramsey, in a famous article published in 1928, said that people have a “weakness of the imagination” about how their actions today affect their own future. He said that if people thought about it correctly, they might well conclude that they should save half their income. That way, the accumulated wealth might make them very happy in their later years. But, mostly, they don’t even think about that possibility. </em></p>
<p><em>Richard Thaler, a contemporary economist, spoke in 1980 of an “endowment effect.” Even though people may admire other things, they act as if they are mostly happy enough with whatever they already have, and lack the will to consider real change.</em> </p>
I am not one for government forced savings, but after studying the endowment effect, and the housing bubble, I clearly think some sort of savings plan needs to be implemented. I have to agree with Shiller, if there was a plan that required someone to opt out, then only a few would actually do so.
Shiller, has written about the <a href="http://cowles.econ.yale.edu/P/cd/d14b/d1459.pdf">wealth effect</a>, on more than <a href="http://cowles.econ.yale.edu/P/cd/d13a/d1335.pdf">one occasion</a>, and I have several papers, written by well known authors, on the endowment effect. That is in case anyone is interested in discussing and researching the topic further, and I can upload the papers for anyone here to read. Even this lesser known author, wrote a paper on the psychology of the housing bubble, that cites the endowment effect. IMO, it is a major contributor the housing bubble, and in many ways, I have suffered from the effects of it myself.
