Gamblers’ savings programs around the globe

Washington State finance professor John Nofsinger has read Nudge and is posting choice architecture examples at Psychology Today. He plugs savings programs that come with a gambling twist (ie. people who commit to saving a little bit of money are eligible for some serious cash and prizes in a lottery). In a previous post on one of these programs, one blog reader brought up Irish Prize Bonds. Nofsinger gives more details on a similar U.K. offering, Premium Bonds.

These programs have existed for centuries internationally. The longest running program may be the Premium Bond in Britain, started in 1956. The bonds require a £100 minimum purchase and make the purchaser eligible for monthly prize drawings. The excitement of gambling is maintained as more than 1 million prizes are given at each drawing. Prizes range from two £1 million prizes to more than a million £50 prizes. Over £30 billion of savings are held in Premium Bonds by one quarter of British households. Programs in Central and South America give away cars and equivalent prizes daily with larger lotteries drawn monthly. The Million-a-Month-Account program was started by First National Bank in South Africa in 2005.

How does a German senior center stop alzheimer’s patients from wandering off?

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Have you noticed any more money in your paycheck?

Only 18 percent of Americans say the stimulus “has done anything to help improve their personal situation,” according to a USA Today poll. When it comes to the $300 million in tax cuts given out in small amounts in each paycheck, the whole point was for people not to notice them. Conor Clarke in the Atlantic reacts appropriately:

The simple fact that people don’t notice the stimulus dollars is not affirmative evidence that the stimulus is working. (Since it’s possible to imagine people saving money they don’t notice.) But the mere fact that most people tell pollsters they don’t notice the stimulus is not evidence one way or another. Relax, USA Today.

Richard Thaler on a public option and health care

In his latest Economic View column, Richard Thaler argues that the debate over what a public option for means for the future of health care in America has gotten way out of hand.

We clearly don’t need any more distractions from the two main issues of health care reform: how to deal with our large uninsured population and how to make the entire system more cost effective. So, for now, let’s ignore the shouted rhetoric about whether “death panels” want to kill off Grandma or whether President Obama wants to turn the country into a socialist state.

But even if we discard these absurdities, and tune out the raucous scenes at town-hall meetings, one big distraction remains: the question of whether a “public option” should be part of the health care solution. To me, the issue is a red herring, and is getting in the way of genuine reform.

Continue reading here.

What’s a watch seller’s favorite time?

10:10 (am or pm). Matt Soniak at Mental Floss explains why 10:10 is the default setting. The arrangement of the hands is symmetrical and non-overlapping. Customers can see the manufacturer’s logo, which is framed by the hands, plus other features like a calendar window or secondary dial. And then there is this great tidbit:

According to the folks at Timex (who set their products at 10:09:36 exactly), the standard setting used to be 8:20, but this made the face look like it was frowning. To make the products look “happier,” the setting was flipped into a smile (occasionally, you’ll still see the 8:20 setting on some clocks or watches where the manufacturer’s logo is at bottom of the face above the 6).

Hat tip: Phil Maymin

A list of little nudges

1) The Justice department says it can save $573,000 through fiscal year 2010 by switching to double-sided printing.

2) Google’s Chrome browser saves ink by defaulting to extra wide margins. Hat tip: Wayne Smith.

3) Paul Sweeney notices that “big kids” slide on the playground has about a two foot gap to the first step, ensuring that you have to be a certain height to get on it in the first place. “Then I noticed that the swings were very low to the ground, and i noticed that the bigger kids were milling about but not sitting in them. Yeah, because their legs were too long, and it would be too uncomfortable. Thus leaving the swing available for the smaller kids (both play areas were right next to each other, thus ensuring that smaller kids and bigger kids had separate play areas).”

4) Stephen Hentrich reads at night. To limit his reading, he set up a switch to disconnect his bedside lamp from the power supply. The lamp reconnects a half hour later just in case he needs to find his way to the bathroom.

5) Chris Peterson wants an online bank account that takes the many “mental accounts” he has in his head for food, rent, iPod stuff, etc. and put them onto his banking homepage. The single checking account look just isn’t doing it for him.

Richard Thaler’s latest thoughts on the efficient market hypothesis

In a new column in the Financial Times, Richard Thaler expands on some earlier thoughts about the efficient market hypothesis by way of a review of Justin Fox’s new book, The Myth of the Rational Market.

What lessons should we draw from (the last two years)? On the free lunch component there are two. The first is that many investments have risks that are more correlated than they appear. The second is that high returns based on high leverage may be a mirage. One would think rational investors would have learnt this from the fall of Long Term Capital Management, when both problems were evident, but the lure of seemingly high returns is hard to resist. On the price is right, if we include the earlier bubble in Japanese real estate, we have now had three enormous price distortions in recent memory. They led to misallocations of resources measured in the trillions and, in the latest bubble, a global credit meltdown. If asset prices could be relied upon to always be “right”, then these bubbles would not occur. But they have, so what are we to do?

Read the full piece here.