Second, the problem with delayed implementation is that the world can change between enactment and implementation. Policy makers in 1983, for example, likely did not foresee that life expectancy would stagnate for low- and moderate-income workers in the meanwhile. The growing gap in life expectancy raises serious questions about any further increases in the full retirement age, since averages are becoming increasingly misleading when it comes to anything linked to mortality.
Finally, the key role played by the full retirement age in driving decisions -- well beyond what an Economics 101 model would suggest -- highlights the need for more policies to take behavioral economics into account. Over the past decade, governments across the world have begun exploring how to use nudges and norms (Richard Thaler has won the Nobel Prize in economics for work in the area). But while there have been some limited successes, a large potential to better incorporate psychology into public policy remains to be tapped.
This article was provided by Bloomberg News.