Paternalistic Pension Policy: Psychological Evidence and Economic Theory

Left to their own devices, many people will not save enough for their old age. This hard truth about human behavior has led American government to make a long and expensive commitment to retirement security programs. Indeed, Congress has made retirement security the most expensive commitment on the American public policy agenda. Of the two main components of this policy, one, Social Security, is by far the most costly domestic program. The other, the system of tax subsidies to employer pensions, is the federal government's largest tax expenditure.' With the great expenditures on these programs, Congress has set out to guarantee that even the most profligate young worker will have something to retire on. These massive programs, however, have not entirely achieved their goal. As a host of critics have pointed out, pension coverage remains distressingly spotty and inequitable. The highest subsi-