In an ideal world our decisions would be the result of a careful weighing of costs and benefits, and informed by existing preferences. According to Behavioural Economics, people are not always self-interested, benefit-maximising and cost-minimising individuals with stable preferences.
When the UK coalition government was formed in May 2010, the Prime Minister helped set up the Behavioural Insights Team at the centre of government and encouraged them to create policy initiatives based on their theories of influence and persuasion. The team now claims to have identified public savings of hundreds of millions.
Eight years ago, Catherine Baab-Muguira was living with her in-laws, without health insurance and carrying student debt. She now argues that there’s a strong, proactive case to be made for choosing a career based on money. For reference, a UK Cabinet Office survey showing the relationship between jobs and levels of life satisfaction.
Robo advisers have been making aggressive moves lately, slashing the minimum balance required for an account; some have eliminated minimums entirely. Meanwhile, some big investment firms have begun offering hybrid services or are experimenting with fully automated offerings.
Interview With Burt Malkiel (audio)
In his classic investment book A Random Walk Down Wall Street published in 1973, the Princeton economist argued: “a blindfolded monkey throwing darts at the stock listings could select a portfolio that would do just as well as one selected by the experts”. Index funds are now one-third of fund assets. Burton Malkiel saw it coming more than forty years ago.