- Behavioural economics covers a lot more than savings behaviour, but I'm sure Chris was just being a little bit provocative with the title of his article. I will focus in this response only on the savings-related aspects of the field.
- It's possible for people to behave irrationally in different ways at different times. My interpretation of the results of this research is that even if they have saved too little early in life, people in their 50s and 60s not only save enough to make up for it, but actually over-compensate. This is "irrational" according to the PIH, but plausible in a psychological model where people are driven by availability heuristics and not just by analytic calculation. If I know I don't have enough saved up, then in conditions of uncertainty I may well save more than I really need to, in some kind of emotional compensation mechanism.
- One of the key insights of (say) Thaler and Benartzi's work on saving is not that people do not know how much to save, but that they have a self-control problem in getting started. A lot of behavioural research is in areas like this. In this view, people can be thought of as having a rational 'core' - their underlying utility functions do look like those of rational agents - but their short-run behaviour systematically departs from what is predicted by those utility functions.
Possibly the major debate between behavioural and traditional economists is about how much this matters. Classical economists tend to say that the errors* will average out or correct themselves, and that they don't matter much for economic theory. Behavioural economists tend to believe that the errors do make a real difference - for example in creating asset bubbles, or reducing average saving over a lifetime to below the utility-maximising level - or in the case of these results, increasing average saving beyond the optimal level. Of course, over a whole lifetime, it can't be both! But it is entirely plausible for savings behaviour to depart from optimality in two different directions at different times, reducing total utility in both cases.
older people discount more than younger ones, and that middle aged people discount less than either group
- evolutionary fitness creates a preference to consume resources in youth when fertility is highest
- it takes time to learn that the future exists and to accurately estimate the likelihood of being able to draw on saved resources, therefore young people are more biased towards immediate gratification