Similar numbers of people underestimate their future Social Security benefits and as a result may oversave
But in the 1930s, it was paid only by the rich, who were already inclined to oversave and underspend.
70) Raising taxes on the rich, by contrast, would compensate for their propensity to oversave, thereby increasing aggregate demand.
An increase in progressive taxes, however, might actually encourage recovery by freeing idle money from the hoards of wealthy taxpayers, who were naturally inclined to oversave.
If you compel everyone to get to what you think is the average, you are going to compel some people to oversave
If you compel everyone to get to what you think is the average you are going to compel some people to oversave
Young people oversave in an attempt to improve their own prospects, and old people oversave in an attempt to improve their children's prospects.
But if inequality becomes so great that people lose all hope of changing their relative positions, then the incentive to oversave disappears, and the inequality could begin to shrink.
Tacchino and Saltzman are quick to point out their findings should not suggest that consumers are "off the hook" when it comes to saving for retirement, or that the financial services industry has zealously encouraged consumers to oversave
This suggests that people should tend to oversave
rather than undersave, so the evidence is not supportive of the undersaving hypothesis.
Any tendency to oversave
as a result of the illiquidity of TESSAs could have been offset by a decline in other forms of saving, so that there would be no surge in spending as TESSAs mature.
To the extent that pension assets cannot be costlessly borrowed against, workers with high discount rates may be forced to oversave
at firms that offer pensions, and thus are expected to avoid such firms.