Both of them would be better off if the default option were switched to opt-out as opposed to opt-in. This is hardly surprising but, sadly, it is still news.
Let me explain.
One of the reasons that some people don’t contribute to their 401(k) plans is because they usually have to “opt in” to the plan — i.e., actively choose to open a plan, select their contribution percentage, make allocation decisions, etc. Faced with these hassles, a lot of people simple choose not to open a plan. If, however, the default is switched to “opt-out” — if they are automatically signed up for the 401(k) when they start working for a company, with an option to cancel — savings rates are significantly increased. This simple policy change — whose result, again, is hardly surprising — has become increasingly common, thanks in large part to the research of behavioral economists like David Laibson and Richard Thaler.
Now for the dialysis patient. Let’s say she’s on a waiting list for a new kidney. But there is a good chance she’ll die before receiving a kidney, since far too few organs are being donated through traditional means to satisfy the demand. What happens, however, if instead of assuming that people do not wish to donate their organs in the event of an untimely death, you assume that they do? The latter option is known as presumed consent, and is practiced in some European countries. How well does it work? The current edition of the British Medical Journal contains an informative debate on this subject between two experts in the field. Here’s how the BMJ summarizes their debate:
Surveys show that 90% of the UK population support organ donation, yet only 23% have registered their wish to donate, writes Veronica English, Deputy Head of Medical Ethics at the British Medical Association.
Research indicates that countries with presumed consent have 25-30% higher donation rates than those with informed consent. So by changing the default position to presumed consent we can help save and transform more lives whilst respecting the wishes of those who want to donate and protecting the rights of those who do not, she says.
Spain has a presumed consent system which portrays a positive attitude towards donation, together with major financial investment and good organisation. It also has the highest recorded donor rate in the world, at 35.1 donors per million population, compared with 12.8 in the UK.
“We cannot afford to wait another five years before beginning to consider alternatives because the longer we procrastinate the more lives are lost unnecessarily,” she warns. “Now is the time for a public debate about presumed consent.”
But Linda Wright, a Bioethicist at the University of Toronto, believes that no single strategy is likely to solve the organ shortage.
She points out that donation rates vary even between countries that practice presumed consent and suggests that presumed consent will not work unless it is accompanied by the necessary equipment, trained personnel and intensive care beds.
She also says encouraging people to talk to their families about their wishes on donation, engaging communities to help build the necessary trust to favour organ donation, and increasing our knowledge of what influences donation rates are also important.
Finally, meeting the demand for organs may require not only increasing organ supply but also optimising disease prevention and recipient selection, she adds.
“Given the multifactorial nature of the problem, presumed consent alone will not solve the organ shortage,” she concludes.
With the U.S. pension landscape having deteriorated so much, is it time, as the libertarian paternalists argue, to create presumed consent for 401(k)s throughout the land? (Richard Thaler debates this and related subjects today in a Wall Street Journal blog.)
And, with the transplant recipient list growing longer every year, is it time to do the same for organ donation?
and 
. You can also watch it on 
Inertia is a powerful force!
I think you mischaracterize a number of your arguments in this post. 1/ In the title- by definition 401ks or other defined contribution-type plans cannot be ‘underfunded.’ Underfunding generally refers to defined benefit, or ‘traditional’ pension plans.
2/ I think you should investigate recent pension legislation. The Pension Protection Act of 2006 includes a number of provisions that pave the way for assumed ‘opt-in’ of automatic contributions (and escalation of such contributions). I suspect a good percentage of employers had already added assumed ‘opt in’ features to their plans, but law was intended to supercede possible conflicts with wage garnishing law.
Inertia is a powerful force!
I think you mischaracterize a number of your arguments in this post. 1/ In the title- by definition 401ks or other defined contribution-type plans cannot be ‘underfunded.’ Underfunding generally refers to defined benefit, or ‘traditional’ pension plans.
2/ I think you should investigate recent pension legislation. The Pension Protection Act of 2006 includes a number of provisions that pave the way for assumed ‘opt-in’ of automatic contributions (and escalation of such contributions). I suspect a good percentage of employers had already added assumed ‘opt in’ features to their plans, but law was intended to supercede possible conflicts with wage garnishing law.
one problem with automating 401ks is the potential for corruption in the “allocation decisions”- if these decisions become unduly influenced/biased, the plans may benefit corporations rather than the workers
one problem with automating 401ks is the potential for corruption in the “allocation decisions”- if these decisions become unduly influenced/biased, the plans may benefit corporations rather than the workers
post #2. I’m not sure I understand. Unless the the allocations are in company stock, I’m not sure this is true. (There are already limits on the allowable % of company stock in 401ks). Also, I believe most plans would match a portion of salary, so this only ‘protects’ workers from leaving money on the table.
I think you mean that the plans might benefit investment-product/plan administrator/asset managers. This influence/bias is already there with or without automatic enrollment or allocation.
post #2. I’m not sure I understand. Unless the the allocations are in company stock, I’m not sure this is true. (There are already limits on the allowable % of company stock in 401ks). Also, I believe most plans would match a portion of salary, so this only ‘protects’ workers from leaving money on the table.
I think you mean that the plans might benefit investment-product/plan administrator/asset managers. This influence/bias is already there with or without automatic enrollment or allocation.
This trade-off between neutral and more intrusive policies reminds me of a usability paper by Russell Beale titled “Slanty Design”. Its title comes from a story that the surface of the desks in US Library of Congress were tilted towards the readers as opposed to being conveniently flat. Combined with a glass panel over the wood, this design prevented coffee cups, food or ink pens to be put on top of the papers while reading them. Compared to the conventional alternative, the design becomes less attractive from the patron’s point of view, but more suitable for their overall purpose.
The intriguing paper was suggesting that the
overall design process should be focusing on what user should and shouldn’t be doing with the end product and in order to achieve this, the initial product designs should be evaluated to find out and eliminate unforeseen side effects.
This trade-off between neutral and more intrusive policies reminds me of a usability paper by Russell Beale titled “Slanty Design”. Its title comes from a story that the surface of the desks in US Library of Congress were tilted towards the readers as opposed to being conveniently flat. Combined with a glass panel over the wood, this design prevented coffee cups, food or ink pens to be put on top of the papers while reading them. Compared to the conventional alternative, the design becomes less attractive from the patron’s point of view, but more suitable for their overall purpose.
The intriguing paper was suggesting that the
overall design process should be focusing on what user should and shouldn’t be doing with the end product and in order to achieve this, the initial product designs should be evaluated to find out and eliminate unforeseen side effects.