Default bias / inertia.
In plain English
Default bias, or inertia, is the tendency to go along with the preset option rather than actively choose. Madrian and Shea showed its power in 2001: when a company switched its 401(k) from opt-in to automatic enrollment, participation jumped sharply, and most employees simply kept the default contribution rate and investment the plan set for them. The default did the deciding. It is a powerful, neutral force: a good default lifts people into saving, and a mediocre one, like a low default rate, can anchor them below what they need.
01Why it matters
Because so many people keep whatever is preset, defaults determine real outcomes like whether you save and how much, so knowing this lets you check the defaults you have accepted rather than assuming you chose them.
02The math, step by step
In the Madrian and Shea case, auto-enrollment pushed 401(k) participation way up, but a large share stayed at the low default savings rate and the conservative default fund the plan picked. Few opted out, and few moved up. The preset choice became most people's actual choice.
03What this is NOT
It is not advice. A default contribution rate or fund is an administrative starting point, not a judgment about what is right for you. Treating the preset as a suggestion of what is optimal is exactly how inertia locks people in.
04Receipts
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