THE PROCESS OF MAKING PENSION DECISIONS - THE NEOCLASSICAL CONCEPT VERSUS BEHAVIORAL ECONOMICS

The explanation of retirement decisions making is based - implicite or explicite on neoclassical basis, such as expected utility theory or efficient market theory. Decisions of participants of pension systems are explained in the sense of an optimal choice, according to the criteria of neo-classical economics. Behavioral economics - such as prospect theory of Kanheman and Twersky, the theory of bunded rationality of Simon or the concepts of "mental framing" and "mental accunting" of Thaler - represent a different point of view, based on more realistic assumptions and evidence of psychological experiments and observations. The aim of this paper is a comparison between these two basic economic theories that are applied in pension economics. This publication is of a conceptual nature. The goal is not a detailed presentation of research results on the practical applications of behavioral decision-making theory in reforming pension systems. The literature analysis method and a comparison method have been used in presented paper. The comparative analysis of the neoclassical and behavioral theory of decision-making shows that the traditional neoclassical way of explaining pension decisions based on the theory of expected utility and the concept of homo economicus turns out to be too simplistic and inadequate. Research conducted within the framework of behavioral economics is not yet a new paradigm in economic sciences, but should be included in pension economics.