Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving in Journal of Political Economy 112 No. 1 Part 2 pp. 164-187, February 2004

Chicago: University of Chicago Press, 2004. 1st Edition. FIRST EDITION IN ORIGINAL PRINTED WRAPS OF A 2004 PAPER USING BEHAVIORAL ECONOMICS TO INCREASE EMPLOYEE SAVING WRITTEN BY THE 2017 NOBEL PRIZE WINNER IN ECONOMICS, RICHARD THALER. The plan the author's put forth, ‘Save More Tomorrow', has been implemented worldwide. "Thaler has a long body of work contributing to our understanding of Economics and business and consumer decision making" and this paper is noted in the Nobel Committee's ‘advanced information' (Nobel Prize Committee). Note that we offer two other Richard Thaler papers separately, "Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show" in The American Economic Review 98 No. 1 pp. 38-71, March 2008 and "Libertarian Paternalism" in The American Economic Review 93 No. 2 pp. 175-179, May 2003.

Thaler's work, including that in this paper, has been devoted to integrating economics with psychology. Thaler "has incorporated psychologically realistic assumptions into analyses of economic decision-making. By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes" (ibid).

In this paper, the Thaler and Benartzi developed a savings program, Save More Tomorrow (SMarT)," to increase employees' 401(k) plan contributions by automatically raising participants' contribution rates whenever they received a raise. The authors recruited three separate companies to introduce the program in the late 1990s and early 2000s and evaluated whether average 401(k) contribution rates increased after program adoption and whether participating employees contributed at higher rates than nonparticipating employees. Because automatic contributions timed to coincide with financial gains addressed two of the primary reasons many employees cited for contributing too little to their savings plans—procrastination and loss aversion, or a tendency to avoid decreases in available resources—the authors hypothesized that the program would improve savings rates" (US Dept of Labor).

Thaler and Benartzi's plan to get people to commit to saving future wage increases was successful. They hypothesized that people who won't save out of today's funds, would save out of funds not yet received, and that further, when those funds were received, most people can't be bothered to change their original plans and thus inadvertently end up saving. "Inertia is thus enlisted on behalf of thrift at no cost to current consumption. Thaler and Benartzi found savings rates increased from 3% to over 13% when employees committed to a program where they save more tomorrow" (Ang, Asset Management, 4.2). CONDITION & DETAILS: Original printed wraps, complete. 8vo. (9 x 6 inches). 335 pages. Bright and clean inside and out. Near fine.