“But new research suggests that low-cost nudges aimed at helping the masses have drawbacks. Even simple interventions that work at first can lead to unintended complications, creating headaches for nudgers and nudgees alike.”
“Researchers have tended to overlook the hidden costs of nudging,”
Opt-out savings programs “have been oversimplified to the public and are being sold as a great way to change behavior without addressing their complexities,”
No one disputes that defaults raise participation rates in retirement programs compared with traditional plans that require employees to sign up on their own.…But little is known about whether automatic enrollees are better or worse off as time passes and their personal situations change…
Although automatic plans increase savings for those who otherwise would have squirreled away little or nothing, others may lose money because they would have contributed more to a self-directed retirement account…In some cases, having an automatic savings account may encourage irresponsible spending or early withdrawals of retirement money (with penalties) to cover debts…people who default into retirement plans learn less about money matters, and share less financial information with family and friends, than those who join plans that require active investment choices.
…The default plan is generous toward those who stay long enough to retire from the state system but less so to those who leave early
The limits of nudge
…Nudges wrongly assume that each person makes decisions in isolation…People belong to various groups that frame the way they make sense of the world…