Open AccessChoice overload paradox and public policy design. The case of Swedish pension system
Author(s) -
Sławomir Czech
Publication year - 2016
Publication title -
equilibrium
Language(s) - English
Resource type - Journals
eISSN - 2353-3293
pISSN - 1689-765X
DOI - 10.12775/equil.2016.025
Subject(s) - status quo bias , procrastination , status quo , pension , choice set , set (abstract data type) , public economics , government (linguistics) , economics , choice architecture , actuarial science , dynamic inconsistency , public policy , business , microeconomics , psychology , finance , social psychology , computer science , market economy , economic growth , linguistics , philosophy , econometrics , programming language
In this paper we focus on an adverse effect of extensive choice widely known as ‘choice overload’. We draw on the case of Swedish funded pensions for illustration and analyze the consequences of the design that allowed for maximizing the choice set. The analysis shows limitations of employing the rational choice approach to the real choice decisions biased with common psychological factors and demonstrates that government’s responsibility for the privatized pension system does not end with the design. We also emphasize the need for a decent default option, which would mitigate socially harmful results of adverse behavior effects like procrastination, status quo bias or abstaining from choice. After all, privatized pension systems still belong to the sphere of public policy.