David Isaac Laibson
Harvard College Professor, Robert I. Goldman Professor
of Economics, Harvard University, Cambridge, USA
David Isaac Laibson is a professor of economics at Harvard University, where he has taught since 1994. His research focuses on macroeconomics, intertemporal choice, behavioral economics and neuroeconomics.
He received an A.B. (summa) from Harvard in 1988, studying under Benjamin M. Friedman, and went on to study at the London School of Economics (MSc. in Econometrics and Mathematical Economics) where he was a recipient of a Marshall Scholarship. He received his PhD from MIT in 1994 and joined the faculty at Harvard once he graduated. He has since gained tenure.
At Harvard, he teaches a popular undergraduate class on “Psychology and Economics”. In addition he teaches graduate courses on macroeconomics, behavioral economics and dynamic programming. His research has been published in prestigious journals such as the QJE, AER, JEP, Econometrica, and Science. Laibson is perhaps best known within economics for his work on time inconsistency, especially his model of quasi-hyperbolic discounting. One of his most prominent early contributions has been the “Golden Eggs and Hyperbolic Discounting” paper in QJE, 1997 where he studied the intertemporal behavior of a time-inconsistent consumer. This work provides a tractable model for self-control problems, in which agents have difficulty sticking to their longterm goals. Agents in Professor Laibson’s models generally value “commitment devices,” such as 401(k) plans or housing equity, that let them accumulate assets without as much temptation to splurge. These models also explain the “debt puzzle,” that American consumers demonstrate both short-run impatience and long-run patience in their lifecycle savings decisions. Laibson has since developed hyperbolic discounting research in many directions, from more advanced theoretical models to computational macroeconomics to conceptual applications.
His own applications of his models have focused primarily on retirement savings, with considerable empirical work on 401(k) plans. He has acquired access to a proprietary dataset of the 401(k) plan account information for several dozen companies, which has let him look empirically at the effects of various 401(k) plan designs and on the investment strategies of the plan participants. Perhaps the most important result to come from this research is that plan participants tend to follow the “path of least resistance,” showing remarkable responsiveness to defaults and other context effects from plan design. For example, a company can dramatically increase participation in its 401(k) plan if it moves to a default of automatically enrolling employees in the 401(k) plan unless they take a minor step to opt out. However, the employees tend to stick at the default contribution rates and investment allocations.