Saving is one of the objectives that, if we could do a global survey, would surely appear among all New Year’s resolutions. And yet, for many people it is still impossible. Behind this there are material causes, such as having an income that is not high enough to support our expenses (or that these are excessive), but sometimes also psychological ones. That’s what 2017 Nobel Laureate in Economics Richard Thaler believes.
His theory begins with a couple of questions: Why do some products appear earlier on supermarket shelves? Why are there simple and almost instant payment methods? All of these are facilities for us to buy or spend money on something specific and quickly. But, What if we used that same lever in reverse? That is what the nudge theory proposes.
According to Thaler, most people mentally compartmentalize their money. The University of Chicago economist specifically believes that we all divide our money into what can be spent now and what should be saved for unforeseen future events.
In 2008, he and Cass Sunstein, a lawyer at Harvard Law School in Cambridge, co-authored the book Nudge: Improving Decisions about Health, Wealth, and Happinesswhere his push theory was born.
Traditional economics assumes that human beings act completely rationally. and make decisions to maximize their well-being. Thaler’s work showed that to understand what people actually do, social scientists must also take into account people’s systematic and predictable psychological biases.
Our thrifty self just needs a push
Thirdly, Thaler has studied people’s struggle for self-control. For example, workers may decide to save more for retirement, but find that they never save even a small amount monthly. Borrowing a concept from behavioral psychology and neuroscience, Thaler and His colleagues explained this apparent contradiction by developing a “planner-doer” model..
According to this model, Each of us, as an economic agent, is torn between the part of us that plans for the future and the part that acts in the moment. Thus, the planner’s desire to save 10% of each salary can be constantly overshadowed by the doer’s need to buy a whim or something not urgently necessary instead of saving.
How to apply the push theory to our savings
Thus his theory defends that dThere should be public incentives to savesomething that we can also transfer to our daily life in a simple way, such as scheduling a transfer to savings as soon as we collect our payroll, so as not to spend that money, or save a less important part of the money for a specific whim.
For example, If we save, for example, 15% of our income for retirement, we also save 5% that we can only spend when we have managed to meet the objective. significant savings over, for example, a year.
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