How to Get People to Save More

Hal Varian covers this topic in today’s New York Times:  Excerpt:

As the authors put it, "Taken together, our results suggest that the
combination of a clear and understandable match for saving, easily
accessible savings vehicles, the opportunity to use part of an income
tax refund to save, and professional assistance could generate a
significant increase in contributions to retirement accounts, including
among middle- and low-income households."


As a 22-year-old graduate student, I fall into the category of a “low income† person, and apparently I should save more. So, government will try to come up with incentives to get me to save (not to mention garnish a chunk of the little income I do have for Social Security). Since my discount rate (of utility) is pretty high, I could care less about saving for the future. In fact, saving right now will actually lower my lifetime utility. I’d have to suffer more now, when I’m poor, in order to add a little to my wealth late in my life when people make more money anyway. The rational thing to do would be something the experts also warn is a problem for low income earners: debt. I am smoothing my lifetime income (an idea that helped Milton Friedman win the Nobel Prize) by racking up debt and saving very little when I am at a period in my life when I earn comparatively little. Alas, the mere idea of low savings and high debt seems to be a horror story de jour for American media.

Rather than looking at a number and saying “this should be higher† or “this should be lower,† why don’t we just give people the freedom to make their own decisions? I guess we are so used to government regulating our lives that the questions in these articles are rarely WHETHER we should engage in a particular paternalistic policy, but the debate centers on HOW to implement it.

It amazes me that a so-called libertarian would admiringly quote a study
entitled "How to get people to save more". Stalin, you know, also
infamously had great savings schemes too. Perhaps Tyler should discuss
these too.

Does Tyler not think that people are free to choose their optimal savings
rates themselves, as opposed to statists dictating what the "optimal"
savings rate for them is; and them deliberately trying to manipulate
personal decisions. Please.

Running into debt can be completely optimal, as previous comments pointed
out. Ever hear of the risk-free rate puzzle. That is, given consumption
growth over time, its a "puzzle" people dont go into debt today (given
consumption smoothing concerns etc).

People will save when they can keep their savings. Why save when inflation and taxes eat up your savings?

Not saving enough?

Did you not account for everyone's "share" of the Social Security Trust fund??

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