Financial Competence

An important branch of research on the quality of financial decision making, including many of the older papers listed below, explores the limits of household financial sophistication, documenting (i) deficiencies in the knowledge and skills necessary for sound financial planning, (ii) the pervasive failure to consult financial experts or use planning tools, (iii) the superficiality of decision processes, and (iv) the prevalence of ostensibly problematic choice patterns.

More recently, my work has attacked these issues through the lens of Behavioral Welfare Economics. My aim has been to develop objective and rigorous methods for determining when financial choices are “bad,” and to measure the associated welfare losses, without imposing someone else’s preferences. These methods facilitate welfare evaluations of various policy interventions such as financial education.