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Abstract:

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CentrePiece article
The Psychology of Savings and Investment
David Laibson and Romesh Vaitilingam
February 2008
Paper No' CEPCP243:
Full Paper (pdf)

CentrePiece 12 (3) Winter 2008

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.

David Laibson's Lionel Robbins lectures were delivered on 19, 20 and 21 November 2007 in the Old Theatre at LSE. Recordings of the lectures and slides from the lectures are available from http://cep.lse.ac.uk/_new/events/event.asp?id=38