words, we protect ourselves from our worst temptations but pay a price to do so. One way behavioral

economists are responding to this is by establishing ways for people to keep themselves free of these

temptations. This includes what we call “nudges” toward more rational behavior rather than mandatory

regulations from government. For example, up to 20 percent of new employees do not enroll in retirement

savings plans immediately, because of procrastination or feeling overwhelmed by the different choices. Some

companies are now moving to a new system, where employees are automatically enrolled unless they “opt

out.” Almost no-one opts out in this program and employees begin saving at the early years, which are most

critical for retirement.

Another area that seems illogical is the idea of mental accounting, or putting dollars in different mental
152 6 • Consumer Choices
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