Tuesday, 29 January 2008

Barack Obama & behavioural economics

How did I miss this article. First time I have seen anyone refer to behavioural economics as left-leaning too. I think this is (wrongly) inferred from the way that it challenges the idea that people necessarily make economically rational/optimal decisions, which many right-leaning people seem to find troublesome.

Senator Obama’s ideas, on the other hand, draw heavily on behavioral economics, a left-leaning academic movement that has challenged traditional neoclassical economics over the last few decades. Behavioral economists consider an abiding faith in rationality to be wishful thinking. To Mr. Obama, a simpler program — one less likely to confuse people — is often a smarter program.


Mr. Obama would instead require companies to deduct money automatically from their employees’ paychecks and place it in a savings account the employee owned. Employees could opt out of the program. But if they did nothing, they would end up saving money. It’s an idea that comes directly from academic research showing that savings rates have jumped when individual companies have adopted such plans.

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