NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS by Richard H. Thaler and Cass R. Sunstein Penguin Books, 2009, 312 pp, ISBN 978-0-14-311526-7This book is best described formally as a general explanation of and advocacy for libertarian paternalism, a term coined by the authors in earlier publications. Informally, it is about how leaders, systems, organizations, and governments can nudge people to do the things the nudgers want and need done for the betterment of the nudgees, or of society. It is paternalism in the sense that "it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier, and better", (p. 5) It is libertarian in that "people should be free to do what they like - and to opt out of undesirable arrangements if they want to do so", (p. 5) The built-in possibility of opting out or making a different choice preserves freedom of choice even though people's behavior has been influenced by the nature of the presentation of the information or by the structure of the decisionmaking system. I had never heard of libertarian paternalism before reading this book, and I now find it fascinating.Written for a general audience, this book contains mostly social and behavioral science theory and models, but there is considerable discussion of structure and process that has roots in mathematical and quantitative modeling. One of the main applications of this social system is economic choice in investing, selecting and purchasing products and services, systems of taxes, banking (mortgages, borrowing, savings), and retirement systems. Other quantitative social choice systems discussed include environmental effects, health care plans, gambling, and organ donations. Softer issues that are also subject to a nudge-based approach are marriage, education, eating, drinking, smoking, influence, spread of information, and politics. There is something in this book for everyone.The basis for this libertarian paternalism concept is in the social theory called "science of choice", the study of the design and implementation of influence systems on various kinds of people. The terms Econs and Humans, are used to refer to people with either considerable or little rational decision-making talent, respectively. The various libertarian paternalism concepts and systems presented are tested and compared in light of these two types of people. Two foundational issues that this book has in common with another book, Network of Echoes: Imitation, Innovation and Invisible Leaders, that was also reviewed for this issue of the Journal are that 1 ) there are two modes of thinking (or components of the brain) - an automatic (intuitive) process and a reflective (rational) process and 2) the need for conformity and the desire for imitation are powerful forces in human behavior. …

Nudge: Improving Decisions about Health, Wealth, and Happiness

行銷硏究 : Marketing research

25. Multiple Imputation for Nonresponse in Surveys. By D. B. Rubin. ISBN 0 471 08705 X. Wiley, Chichester, 1987. 258 pp. £30.25.

Multiple Imputation for Nonresponse in Surveys

We investigate conditions sufficient for identification of average treatment effects using instrumental variables. First we show that the existence of valid instruments is not sufficient to identify any meaningful average treatment effect. We then establish that the combination of an instrument and a condition on the relation between the instrument and the participation status is sufficient for identification of a local average treatment effect for those who can be induced to change their participation status by changing the value of the instrument. Finally we derive the probability limit of the standard IV estimator under these conditions. It is seen to be a weighted average of local average treatment effects.

Evolution and Rationality Some Recent Game-Theoretic Results. Identification and Estimation of Local Average Treatment Effects

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

/pdf/the-economic-importance-of-financial-literacy-theory-and-17mb1g4cfb.pdf

The Economic Importance of Financial Literacy: Theory and Evidence

We use cross-national harmonized micro data from a broad sample of developed and developing countries and investigate the heterogeneity of the effect of entry, contract enforcement regulation, and financial development on both the decision to become an entrepreneur and the level of employment of newly created businesses. We focus on the interaction between the level of regulation and financial development and some individual characteristics that are important determinants of entrepreneurship, such as gender, business skills, and social networks. We find that entry regulation moderates the effect of business skills, while accentuating the effect of gender, even after accounting for the level of financial development. Specifically, women are more likely to enter into entrepreneurship in countries with higher levels of entry regulation, but mainly because they cannot find better work. This effect is also more pronounced in countries that are less financially developed. Furthermore, individuals who report having business skills are less likely to enter entrepreneurship in countries with higher entry regulation. Finally, we also find that individuals who know other entrepreneurs are less likely to start large businesses in countries with higher levels of entry and contract enforcement regulation.

Heterogeneity in the Effect of Regulation on Entrepreneurship and Entry Size

In this paper, we developed and experimentally evaluated four novel educational programs delivered online: an informational brochure, a visual interactive tool, a written narrative, and a video narrative The programs were designed to inform people about risk diversification, an essential concept for financial decision-making The effectiveness of these programs was evaluated using the RAND American Life Panel Participants were exposed to one of the programs, and then asked to answer questions measuring financial literacy and self-efficacy All of the programs were found to be effective at increasing self-efficacy, and several improved financial literacy, providing new evidence for the value of programs designed to help individuals make financial decisions The video was more effective at improving financial literacy scores than the written narrative, highlighting the power of online media in financial education

/pdf/visual-tools-and-narratives-new-ways-to-improve-financial-35pto1j16h.pdf

Visual Tools and Narratives: New Ways to Improve Financial Literacy

The United States’ 44 million African–Americans account for 13% of the US population and have a significant impact on the economy, with $1.2 trillion in purchases annually. Yet the financial well-being of African–Americans lags that of the US population as a whole, and whites in particular. The reasons for these gaps are complex, but one area of importance in addressing them is increased financial literacy, the knowledge and understanding that enable sound financial decision-making and effective management of personal finances. This report uses the 2019 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) to examine the current state of financial literacy and financial wellness among African–American adults. The study finds that personal finance knowledge among African–American adults lags that of whites. Further, it varies across demographic groups within the African–American population, with greater financial literacy among men, older individuals, those with more formal education, and those with higher incomes. Insuring, comprehending risk, investing, and identifying go-to information sources are the areas where personal finance knowledge is lowest; borrowing and debt management is the area of highest personal finance knowledge. There is a strong link between financial literacy and financial wellness among African–Americans. Those who are more financially literate are more likely to plan and save for retirement, to have non-retirement savings, and to better manage their debt; they are also less likely to be financially fragile. A more refined understanding of financial literacy among African–Americans can inform initiatives to improve financial well-being. While not a cure-all, increased financial literacy can lead to improved financial capability and practices that benefit even those with relatively low incomes. TOPICS:Wealth management, retirement Key Findings • Personal finance knowledge among African–Americans is low and lags that of whites. African–American financial literacy tends to be lowest in the areas of insuring, comprehending risk, investing, and go-to information sources. • Financial literacy varies across demographic groups within the African–American population; it is higher among men, older individuals, those with more formal education and higher incomes. • There is a strong link between financial literacy and financial wellness among African–Americans. Those who are more financially literate are more likely to plan and save for retirement, to have non-retirement savings, and to better manage their debt; they are also less likely to be financially fragile.

Financial Literacy and Wellness among African–Americans: New Insights from the Personal Finance (P-Fin) Index

Permanent income, current income and consumption: Evidence from panel data

Increasingly, individuals are in charge of their own financial security and are confronted with ever more complex financial instruments. However, there is evidence that many individuals are not well-equipped to make sound saving decisions. This paper demonstrates widespread financial illiteracy among the U.S. population, particularly among specific demographic groups. Those with low education, women, African-Americans, and Hispanics display particularly low levels of literacy. Financial literacy impacts financial decision-making. Failure to plan for retirement, lack of participation in the stock market, and poor borrowing behavior can all be linked to ignorance of basic financial concepts. While financial education programs can result in improved saving behavior and financial decision-making, much can be done to improve these programs' effectiveness.

Annamaria Lusardi

Papers

Heterogeneity in the Effect of Regulation on Entrepreneurship and Entry Size

Visual Tools and Narratives: New Ways to Improve Financial Literacy

Financial Literacy and Wellness among African–Americans: New Insights from the Personal Finance (P-Fin) Index

Permanent income, current income and consumption: Evidence from panel data

Financial Literacy: An Essential Tool for Informed Consumer Choice?