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

How financial literacy varies among U.S. adults: The 2022 TIAA Institute-GFLEC Personal Finance Index

In the past two decades, the personal saving rate in the United States has declined dramatically, from 10.6 percent of disposable personal income in 1984 to a low of 2.3 percent in 2001, before bouncing back to 3.9 percent in 2002 (U.S. Department of Commerce, 2003). There is considerable debate over the reasons for this decline in the personal saving rate, as calculated by the National Income and Product Accounts (NIPA), as well as its usefulness as an indicator of saving. Many observers have questioned the influence of stock market wealth on conventionally measured personal saving rates and have noted three major ways in which the stock market and saving may be linked. One way in which the stock market can affect personal saving, which is the focus of this brief, has to do with the treatment of pension plans in the NIPA. We show that dramatic swings in asset markets have perverse effects on the personal saving rate. Indeed, according to the official NIPA accounting rules, the entire retirement saving sector contributed nothing to measured personal saving between 1996 and 2000. The analysis discussed in this piece covers the years 1988-2000, a time when the stock market was booming and personal saving rates were dropping. While the conditions have reversed with the onset of the bear market in 2000, understanding the experience of the 1990s offers key insights into what is happening today.

/pdf/pension-accounting-personal-saving-5efbthpnpr.pdf

Pension accounting & personal saving

This paper analyzes the financial fragility of Dutch households by examining their ability to raise 2,000 euro within a month in case of a financial emergency. Using data from a survey module fielded in 2016 in the CentERpanel, we document that one in seven Dutch households is financially fragile. Moreover, some demographic groups, specifically females, single person households, renters, low-income households, the lower educated and the unemployed are more likely to be financially fragile. While a majority of households would use their savings to cope with a financial emergency, a noticeable fraction of households would resort to other methods, such as relying on family and friends or borrowing using credit cards. Financial literacy, confidence in financially literacy skills and probability numeracy are all associated with financial fragility as well as with the methods people use to cope with an emergency. These results support previous findings on the importance of financial knowledge and numerical ability for financial decision making.

Skating on Thin Ice: New Evidence on Financial Fragility

Of particular interest in the present economic environment is whether access to credit is changing peoples’ indebtedness over time, particularly as they approach retirement. This project analyzes older individuals’ debt, debt management practices, and financial fragility using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). Specifically, we examine three different cohorts (individuals age 56–61) in different time periods, 1992, 2002 and 2008, in the HRS to evaluate cross-cohort changes in debt over time. We also draw on recent data from the National Financial Capability Study (NFCS) which provides detailed information on how families manage their debt. Our goal is to assess how wealth and debt among older persons has evolved over time, along with the potential consequences for retirement security. We find that more recent cohorts have taken on more debt and face more financial insecurity, mostly due to having purchased more expensive homes with smaller down payments. In addition, Baby Boomers are more likely to have engaged in expensive borrowing practices. Factors associated with better debt outcomes include having higher income, more education, and greater financial literacy; those associated with financial fragility include having more children and experiencing unexpected large income declines. Thus, shocks do play a role in the accumulation of debt close to retirement. But it is not enough to have resources, people also need the capacity to manage those resources if they are to stay out of debt as they head into retirement.

Annamaria Lusardi

Papers

How financial literacy varies among U.S. adults: The 2022 TIAA Institute-GFLEC Personal Finance Index

Pension accounting & personal saving

Skating on Thin Ice: New Evidence on Financial Fragility

Older Adult Debt and Financial Frailty

Savings after Retirement : Evidence Based on Three Different Savings Measures (Subsequently published in Labour Economics, (6), 1999)