The latest issue of Wired has an interesting section called ‘The Smart List’. Essentially, it’s a list of people that Wired thinks the new president should consult with on a wide range of issues.
One of the more interesting people they spoke with was David Laibson, a behavioral economist at Harvard. When talking about the traditional economic model, he mentions that people get important decisions wrong too often. His solution?
I find this incredibly interesting because our society has essentially made everything flexible and non-constraining for a reason. If you didn’t chose option 1 or option 2, you shouldn’t be forced to take either is the thinking. While that makes sense logically and rationally, it doesn’t work well when you consider that most people are paralyzed by choice. Many will default to doing nothing for fear of making the wrong choice.
The example he uses is 401k enrollment. According to him, if you make people opt-out of a 401k rather than opt-in, enrollment increases over 50%.
“A lot of big problems can be fixed by introducing defaults”
This is true not only in matters of money, but in anything really. The software industry is slowly learning this after decades of implementing absurd complexity & unneeded flexibility. Apple created a Microsoft Office competitor, iWork, built around the philosophy. Do the apps in iWork do everything that the apps in Office do? Nope. Do many people care?