April 12, 2005

The Savings Conundrum

Why aren't Americans saving more money toward retirement, NYT wonders, when we all know it's something we ought to do? The article summons forth the impressively up-to-date explanatory power of the loss aversion theory of economics (the idea that we value $100 we might lose more than $100 we might gain), the theory of hyperbolic discounting (the overweighting of immediate rewards and costs), and brain-scan studies on the divergent roles of the lateral prefrontal cortex and the limbic system in decisionmaking. It ends by considering "a neurochemical intervention mechanism" to help workers save money. A 401K pill?

But there's another, simpler answer, and it's right there in the headline of another article on the very same page of the online Times: Falling Fortunes of Wage Earners.

Not to mention the fact that we're all exposed to a continuous barrage of messages telling us to buy, to spend our money. What if all of us saw hundreds of advertisements per day telling us to save?