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Today\\u2019s program is really special, because my guest is Brigitte Madrian. Brigitte is the Aetna Professor of Public Policy and Corporate Management at the Harvard Kennedy School, and also co-director of the Household Finance working group at the National Bureau of Economic Research. She is a leading expert in behavioral economics and consumer decision-making regarding both health and finance, and in finance,especially savings and retirement.\\xa0Importantly to me, she is also my faculty advisor for the book I\\u2019m writing.

Regular listeners know I\\u2019m spending two years as a Senior Fellow at the Center for Business and Government in the Kennedy School.\\xa0\\xa0As I started into my fellowship last year, I had the great fortune of linking with Brigitte as my faculty advisor for the book.\\xa0 She is part of the movement in economics that\\u2019s rethinking the classical theory that assumes that everyone behaves rationally.\\xa0That work goes to the very heart of the condundrum in consumer finance, where both policymakers and industry have to grapple with the fact that consumers don\\u2019t always make the choices that are best for them. Understanding the many reasons why that happens, and how to elicit better decisions, is one of the keys to improving consumer financial health.

For this podcast, I met with Brigitte in her office on a lovely summer day. The Kennedy school is a complex of brick buildings clustered on the bank of the Charles River \\u2013 it\\u2019s located about halfway between the Harvard Business School, on the other side of the river,\\xa0and the old Harvard Yard,\\xa0which is the traditional heart of the college (Harvard was founded in 1636).\\xa0The Kennedy School has been undergoing construction ever since I got here \\u2013 I get a fascinating display of cranes and I-beams and such from my little office space in the Belfer building \\u2013 but Brigitte and I had a quiet talk during summer semester, with most of the students away.

She came to Harvard about 10 years ago, and in our talk, she quoted someone once saying that professional schools tend to be run very much like the professions they represent. It\\u2019s certainly true of the Kennedy School, which is all about gathering together a multiplicity of voices to grapple with public policy challenges. And it\\u2019s especially true for my center,\\xa0which is the Mossavar-Rahmani Center for Business and Government.\\xa0All of our fellows are working on finding practical solutions at the nexus of public policy and the private sector.

That\\u2019s what Brigitte has done in her research. She started out by looking at data on retirement plans (her first paper was about automatic enrollment), and she found the results so compelling that she didn\\u2019t even need to do statistical analysis to see that automatic enrollment led to dramatic increase in savings plan participation,\\xa0especially among the groups least likely to participate -- employees who were younger, lower-paid employees, newly-hired, black and latino. The automatic enrollment caused an amazing 50-60% increase in plan participation.

That paper got a lot of attention and led her to a 20 year research agenda trying to understand financial decisions. I think you\\u2019ll be very interested in her views about the track record for policies like financial literacy education and financial incentives to save. She pinpoints complexity as a critical problem, and she\\u2019s not a fan of disclosure as the solution.

Our talk was especially timely because we met shortly after release of an important study she helped produce, by the Retirement Security and Personal Savings Commission of the Bipartisan Policy Center\\xa0in Washington. \\xa0\\xa0The report is titled Securing Our Financial Future, and makes recommendations for policymakers on how to increase income security for older individuals. She\\u2019ll describe some of the highlights.

I\\u2019m excited about behavioral economics because when these insights are combined with new technology, it becomes possible to create vastly better financial products. You may remember my discussion with Ethan Bloch of Digit, which incorporates these same principles of letting people save automatically instead of through daily effort, and in trying to bring financial decision-making time to zero. Easy and sound financial management is suddenly becoming possible.

Brigitte\\u2019s biography:

Brigitte Madrian is the Aetna Professor of Public Policy and Corporate Management at the Harvard Kennedy School.\\xa0 Before coming to Harvard in 2006, she was on the Faculty at the University of Pennsylvania Wharton School (2003-2006), the University of Chicago Graduate School of Business (1995-2003) and the Harvard University Economics Department (1993-1995).\\xa0 She is also a research associate and co-director of the Household Finance working group at the National Bureau of Economic Research.

Dr.\\xa0Madrian\\u2019s current research focuses on behavioral economics and household finance, with a particular focus on household saving and investment behavior.\\xa0\\xa0Her work in this area has impacted the design of employer-sponsored savings plans in the U.S. and has influenced pension reform legislation both in the U.S. and abroad. She is also engaged in research on health, using the lens of behavioral economics to understand health behaviors and improve health outcomes; in the past she has also examined the impact of health insurance on the job choice and retirement decisions of employees and the hiring decisions of firms.

Dr.\\xa0Madrian received her Ph.D. in economics from the Massachusetts Institute of Technology and studied economics as an undergraduate at Brigham Young University.\\xa0 She is the recipient of the National Academy of Social Insurance Dissertation Prize (first place, 1994) and a two-time recipient of the TIAA-CREF Paul A. Samuelson Award for Scholarly Research on Lifelong Financial Security (2002 and 2011).

Also\\u2026.

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