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The Psychology of Savings and Investment

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  • David Laibson
  • Romesh Vaitilingam

Abstract

The pensions world of 2010 is going to look a lot more useful to unsophisticated investors than the pensions world of 2000, thanks to policy recommendations emerging from the new field of 'behavioural economics'. That is the contention of Harvard University's David Laibson, who recently delivered the Lionel Robbins Memorial Lectures at LSE. We need a combination of psychology and economics to understand people's savings and investment decisions, he says. We can then build institutions that help people do what they want to do. For example, opt-out pension schemes - in which new employees are automatically enrolled in a firm's pension scheme, with fraction of their monthly salary deposited directly into a retirement account - are highly effective.

Suggested Citation

  • David Laibson & Romesh Vaitilingam, 2008. "The Psychology of Savings and Investment," CentrePiece - The magazine for economic performance 243, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepcnp:243
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