Default Rules and Soft Paternalism
On the face of it, one would expect about the same fraction of employees to go with each option in each firm, since the amount at stake is large enough to make the extra cost of filling out a request or stopping by the human resources office to tell them that you want to switch away from the default trivial in comparison. I am told that in fact such default rules have quite a large effect--that many more employees will go with the pension plan in firm A than in firm B. I have not looked into the literature on the subject myself, but for the moment will assume it is true.
If so, that suggests the possibility of "soft paternalism." If the government thinks employees would be better off putting money into a pension plan, they require all employers to act like firm A. It is "soft" because the employee is still free to choose whether or not to go along. I gather that some thinkers on what I think of as the new new left--academics who accept a good deal of the libertarian view of the desirability of markets and individual choice while still looking for ways of altering behavior in what they think desirable ways--have made proposals along these lines. Presumably part of their argument is that if individual choice is being affected in this way by default rules then it isn't entirely rational, so there is nothing wrong with taking advantage of the irrationality to get people to voluntarily choose what they "ought" to choose.
When I discussed this issue with my daughter Rebecca, she offered an interesting explanation of the pattern of behavior--interesting in part because it makes the behavior rational. The cost of switching into or out of the pension plan is negligible, but the cost of getting the information needed to decide whether to switch in or out is not. In this case as in many others, one cheap way of getting information is by observing what other people do. If, as seems plausible, the firm will have chosen as the default the option most of its employees prefer, thus saving trouble for all concerned, the default rule is a signal of the choices of other employees, hence cheap evidence of what an employee who doesn't know which option is better should do. So the employee rationally goes along with the default option unless he has some good reason to think the alternative is better.
If this analysis is correct, it implies that soft paternalism won't work, or at least won't work for very long. Once it becomes clear that default rules are being chosen not by the employer to fit employee preferences but by the government to nudge employees into doing what the government thinks they should do, the argument for going along with the default breaks down.
Of course there might be a new argument--that if the government thinks you should get a pension that's a reason to do so. But if people actually accept that, there is no need to use default rules; the government can simply tell employees what it thinks they should do.