not be taken as an indication that consumers are irrational, but
rather that economists’ models are missing some important
elements. For example, perhaps the consumer who buys the
lower-priced but inefficient appliance knows perfectly well
about the higher future operating costs but is income or credit
constrained today. So they prefer to spend less now, even
though they know they will spend more over time. And perhaps
individuals who do not contribute to RRSPs do so because their
current income is so low that they place the value of current
consumption well above the value of the greater amount of
future consumption that the RRSP would help to generate.
Another set of research findings by behavioural economists is
more difficult to dismiss. In particular, there is considerable
evidence that when faced with making a choice between
clearly specified options, the way the options are presented
affects consumers’ choices. For example, when employees are
offered a choice to have money deducted from their
paycheques and directed toward their pensions, a relatively
low number choose this option. But if the “default” choice is
made to direct money to their pension, and the employee can
still choose to opt out of this choice, then most employees do
not choose to opt out. So, presented with exactly the same two
possible outcomes, more employees select the pension option
when it is the default choice.
The implications of these types of findings for public policy are
considerable and have led to the idea of policy “nudges.” For