In his latest column in the New Yorker, financial writer James Surowiecki reports the return of a retail phenomenon not seen since the Great Depression: the layaway purchase. Before the financial crash, the default payment mode for consumers was the credit card. Buy now, pay later. Now, as the financial crunch continues to pinch pockets, more stores are offering layaways. Here's how they work:

You pick out the product you want, make a down payment, pay a service fee (typically five dollars), and then make regularly scheduled payments over a period of time until you’ve paid off the full price. There are no interest payments, and if you don’t make all the payments you get your money back, minus a cancellation fee. It’s the exact opposite of installment credit, where you get the product, and then pay for it.

According to standard economic theories, Surowiecki explains, rational consumers would not choose the layaway. Why not simply save enough money in a bank account and then head to the store? Or why not use your credit card and pay the balance in a sustainable manner? But Surowiecki cites RSF-funded research in the field of behavioral economics to explain the appeal of layaways:

More on Consumer Finance
• Study: Misunderstanding Savings Growth: Implications for Retirement Savings Behavior
• RSF Review: Special Issue on Consumer Finance
• Behavioral Economics and Consumer Finance Working Group

Why don't Americans save more for retirement? Earlier this month, I discussed a study that hypothesized that people are not invested in their "future selves"; for many, the pain of stashing away part of the weekly paycheck outweighs the benefits of bigger savings 40 years down the road. But another article, which also appeared in the RSF-funded issue of the Journal of Marketing Research, examines another problem: do people underestimate the power of compound interest?

Here's the question the researchers ask: Imagine you deposit $1,000 at the start of each of three years and earn 7 percent interest, compounded annually. At the end of those three years, how much money would you have? The correct answer is $3,440, almost 15 percent (not 7 percent) more than than the total amount deposited, as interest is earned annually on the previous interest earned. The authors of the article—Craig McKenzie and Michael Liersch—explain why these calculations matter:

Due to compound interest, savings grow exponentially over time, but most undergraduate students believe that savings grow linearly, and the therefore grossly underestimate how much money can accumulate over the span of a typical career...Because they believe that savings grow linearly, they also underestimate the cost of waiting to save, which makes the decision to put off saving more appealing than it ought to be. However, we show that increasing students' and real employees' awareness of the exponential growth of savings over time, even subtly, helps them appreciate the benefits of saving and motivates them to save for retirement.

The website FiveBooks recently asked economist Daron Acemoglu to recommend a reading list on rising inequality in the industrialized world. He listed two books that are connected to research funded by the Russell Sage Foundation: The Race Between Technology and Education (co-authored by RSF trustee Lawrence Katz) and Unequal Democracy, which was co-published by the Foundation.

Here's what Acemoglu said about Katz's book:

Several stories have appeared recently about the Pew Research Center's study on declining marriage rates in America (see here and here for examples). Based on analysis of U.S. Census data, the study finds that barely half of all adults in the U.S. are currently married—a record low. While the report does not discuss the causes behind the trend (a long-term one that has also been seen in other industrialized countries), some have asked what role the Great Recession may play in couples' decisions to delay their wedding days.

As part of its special initiative on the Great Recession, the Russell Sage Foundation published a study entitled "The Great Recession's Influence on Fertility, Marriage, Divorce and Cohabitation." Here's the key paragraph on marriage:

Figure 8.6 (below) shows the marriage rate since 1998. Since the start of the Great recession, the marriage rate has declined, but that rate was already declining prior to the recession. Contrary to some accounts in the media, there seems to be no major inflexion of the trend in the Great Recession "window" (shaded area in the figure)...We find little evidence of major recession effects on marriage. Further analysis with future data will be able to answer this question with greater precision.