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Whenever surveys ask people whether they’re saving too much, too little, or not enough, the overwhelming majority claim to be saving too little. But you always get a few people who claim they’re saving too much. I’ve lately been wondering who those people are and how they manage to save too much. Do they not know what to spend their money on? Are they constrained by a controlling spouse? Did they read the question wrong?
If we allow people to make random mistakes, we would expect the proportion of people saving too much and too little to be similar. If anything, there should be more people saving too much if credit card companies realize people may borrow too much. Maybe there are people who are saving too much but don’t realize it.
An easy answer is that certain things like spending money are tempting and people’s long-run self conflicts with their short-run self, resulting in under-saving. But lately I’ve been wondering how social norms and expectations contribute to how much we think we should be saving. An interesting aspect of this is that social norms can make you save too little (because buying a house, a car, and an expensive vacation is something every American should be doing) AND make you think you should be saving more (because it’s good to prepare for the future).
Since it is January, a related question is why are New Year’s resolutions so one-sided? Think about how the following sounds to you:
This year, I resolve to spend more money, eat more junk food, exercise less, gain weight, travel less, spend less time with loved ones and more time on facebook and on drugs…
For some reason, I keep thinking of the analogy of having a baby when I this PhD thing.
If you think about it, the process is very similar, especially in the later years.
Year 3 = first trimester. You feel like you’re on top of the world (= like you just had sex). You have no responsibilities and face little or no expectations.
Year 4 = second trimester. The morning sickness/mood swings start. Periodically, you still remember why you’re doing this. Other times, you want to abort the whole thing.
Year 5 = third trimester. Life becomes difficult. Labor starts, and you’re in a lot of pain. You worry about whether your "baby” will have all its fingers and toes intact ( = whether you’ll realize there’s a defect in your code which invalidates all your findings).
Year 6…If you’re still in grad school by year 6, they’ll induce labor by cutting your funding.
I know this post will make no difference whatsoever, but I just have to get my opinion out there. As much as I think that health care reform is necessary, no bill may be better than any bill. And the more I hear about what the current proposal contains (yes, I haven’t read the bill myself, and neither has anyone except probably 10-15 people), the more I think we’re going to end up with the "any bill” outcome.
If the US passes a bill that worsens the health care system, it’s going to be really hard to undo. First, who’s going to want to revisit something that just passed? We have unemployment, global warming, the financial sector, Guantanamo, Iran, Iraq, Afghanistan, China, and a million other things to worry about. Unless the reform has DRASTIC negative effects, Congress will likely not address health care again for a while.
Even if the bill creates disastrous consequences which prompt re-regulation, any changes will likely resemble a "kludge", a quick fix which may work for a while but makes the entire system more inefficient in the long run.
It is important to get this right. And right now it seems that we’re mostly getting it wrong.