February 2017

04Feb

How Behavioral Economics Trims Its Sails and Why

By Ryan Bubb & Richard Pildes The preference of behavioral law and economics (BLE) for regulatory approaches that preserve “freedom of choice” has led to incomplete policy analysis and inefficient policies. BLE has been broadly regarded as among the most promising new developments in public policymaking theory and practice. As social science, BLE offers hope that better understanding of human behavior will provide a sounder foundation for policy design. As politics, BLE offers a possible political consensus built around minimalist...

February 4, 2017
Articles, Regulation
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04Feb

Lessons for Public Pensions from Utah’s Move to Pension Choice

By Robert L. Clark, Emma Hanson & Olivia S. Mitchell This paper explores what happened when the state of Utah moved away from its traditional defined benefit pension. Instead, it offered new hires a choice between a conventional defined contribution plan, versus a hybrid plan option having both a guaranteed benefit component and a defined contribution plan shifting investment risk to employees. We show that some 60 percent of new hires failed to make any active choice and, as a...

February 4, 2017
Articles, Regulation, ,
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04Feb

Behavioral Portfolio Management

By Thomas Howard Behavioral Portfolio Management (BPM) is presented as a superior way to make investment decisions. Underlying BPM is the dynamic market interplay between Emotional Crowds and Behavioral Data Investors. BPM’s first Basic Principle is that Emotional Crowds dominate the determination of both prices and volatility, with fundamentals playing a small role. The second Basic Principle is that Behavioral Data Investors earn superior returns. I present the evidence supporting these first two Principles. The third Basic Principle is that...

February 4, 2017
Articles, Corporate Governance, Investing
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04Feb

Nudging: A Very Short Guide

By Cass R. Sunstein This brief essay offers a general introduction to the idea of nudging, along with a list of ten of the most important “nudges.” It also provides a short discussion of the question whether to create some kind of separate “behavioral insights unit,” capable of conducting its own research, or instead to rely on existing institutions. Full Content: SSRN

February 4, 2017
Articles, Regulation,
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04Feb

Workplace-Linked Pensions for an Aging Demographic

By Olivia S. Mitchell & John Piggott Pensions and population aging intersect in two ways. First, demographic change threatens the sustainability of traditional pay-as-you-go social security pensions, leaving workplace-linked pensions with a greater role in retirement provision. Second, as the Baby Boom generation enters retirement, new challenges arise around its retirement support. This chapter reviews some of the implications of population aging for workplace pensions in this new environment, outlines market considerations important for workplace-related pension design for the future,...

February 4, 2017
Aging, Articles, Labor Market, Pension design, , , ,
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04Feb

Should Regulation Be Countercyclical?

By Jonathan Masur & Eric Posner Politicians and commentators have from time to time proposed that regulations be suspended or delayed during recessions because of their adverse impact on employment. We evaluate this argument from within a macroeconomic framework. We argue that a case can be made for what we call countercyclical regulation if certain empirical premises are valid; explore the ways in which such regulation might best be designed; and evaluate the legal authority of agencies to issue countercyclical...

February 4, 2017
Articles, Regulation
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04Feb

Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence

By Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla & Tatjana Schimetschek People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers...

February 4, 2017
Articles, Pension design, Regulation, ,
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04Feb

Pension Reform in Britain

By Edward Whitehouse This paper examines the evolution of the pension system in Britain. In particular, it focuses on the shift from pay-as-you-go, state-run defined-benefit pensions to individual, private-sector, funded defined-contribution accounts. It looks at three issues in this reform: the financing of the transition from pay-as-you-go to funded provision; the fiscal impact of voluntary switching and adverse selection; and the question of the degree to which personal pension accounts were 'over-sold' to individuals for whom they were not suitable....

February 4, 2017
Adequacy, Articles, Regulation
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04Feb

Uber Retirement

By Paul Secunda The rise of the gig economy with its part-time, itinerant, independent workers, in conjunction with the employee-centric nature of occupational retirement benefits under ERISA, has led to gig employees largely lacking meaningful retirement benefits. Current proposals to provide portable benefits to gig workers as independent workers or independent contractors are unacceptable because such benefits would not be secured by the fiduciary consumer protections of ERISA. However, two developments with regard to the retirement security of the gig workers...

February 4, 2017
Articles, Labor Market, Pension design
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04Feb

Inside Debt

By Alex Edmans & Qi Liu Existing theories advocate the exclusive use of equity-like instruments in executive compensation. However, recent empirical studies document the prevalence of debt-like instruments such as pensions. This paper justifies the use of debt as efficient compensation. Inside debt is a superior solution to the agency costs of debt than the solvency-contingent bonuses and salaries proposed by prior literature, since its payoff depends not only on the incidence of bankruptcy but also firm value in bankruptcy....

February 4, 2017
Articles, Investing, Pension design, ,
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