Economic theory dating

11-Aug-2017 10:33

The idea was that auto enrolment would make saving the default for employees, and thus make it easier for them to do what they really wanted to do and push up savings rates. Since auto enrolment was introduced by the Government in 2012, active membership of private sector pension schemes has jumped from 2.7 million to 7.7 million in 2016.

Organ donation is another example of an area where nudge policy has worked.

Yet it’s hard for libertarians to make a persuasive cases against such policy nudges in relation to pensions and organ donation because the opt-out option always remains available for people. The previous US president Barack Obama recruited Cass Sunstein as an adviser and exhorted US government departments to adopt behavioural economic concepts such as nudge.

In 2010 the UK Government set up a Behavioural Insights Team, commonly dubbed a “nudge unit”, to develop policies.

The Spanish opt-out system is one of the reasons Spain is a world leader in organ donation.

France also switched to an opt-out regime this year.

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The theory is the same as relates to pensions: deep down most people want to be donors if they die in an accident and their organs could be used to save someone else’s life but for various reasons never get around to registering. The concept is a relatively subtle policy shift that encourages people to make decisions that are in their broad self-interest.