In my work as a behavioral economist, I’ve thought a lot about how nudges can drive lasting behavior change. In the domain of retirement savings, Nobel laureate Richard Thaler and I devised a program called Save More Tomorrow back in the mid-1990s that used nudges to help people make better decisions about their long-term financial future. That program invites employees to gradually increase their savings rate over time, and it has been a success: according to my latest estimates, it has boosted the savings rates of as many as 15 million Americans.
Unfortunately, it took us 20 years to help that many people. The slow pace of this process has led me to become increasingly interested in digital nudging, which seeks to identify online designs that help people make smarter choices. The advantages of digital nudging are two-fold. First, the digital space allows us to conduct research much faster, as
President Obama recently called for a new fiduciary standard for retirement plan advisors, saying, “the rules governing retirement investments were written 40 years ago … I am calling on the DOL to update the rules.” You might have missed this story — or at least assumed that designing a fiduciary standard is the fraught work of policy makers. The reality, however, is that this issue is deeply connected to how we make decisions on digital displays, which is of crucial importance to investors, businesses, and policy makers.
The details of the proposed new rules are sure to raise questions about things like fee disclosures and conflicts of interest. Such a debate is unavoidable. But I also believe it will be a distraction, preventing us from considering a far more urgent set of questions for retirement plan advisors, consultants, and those tasked with evaluating benefit plans for their businesses. Simply