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The Financial Education Fallacy

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  • Lauren E. Willis
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    Abstract

    Research to date does not demonstrate a causal chain from financial education to welfare-enhancing financial behavior, in part due to biases, heuristics, and emotional influences on decisions. Yet the search for effective financial education continues. But it is time to ask whether giving every person effective financial education would make us better off. Two reasons it might not are discussed here. First, the time, expense, and invasion of privacy required would be enormous. Second, such a world would entail a decrease in individual autonomy. Alternative tools could potentially increase household financial welfare and security at lower social and individual expense.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.429
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 101 (2011)
    Issue (Month): 3 (May)
    Pages: 429-34

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    Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:429-34

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    1. Ian Hathaway & Sameer Khatiwada, 2008. "Do financial education programs work?," Working Paper 0803, Federal Reserve Bank of Cleveland.
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    Cited by:
    1. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    2. Disney, Richard & Gathergood, John, 2013. "Financial literacy and consumer credit portfolios," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2246-2254.
    3. Bruhn, Miriam & Lara Ibarra, Gabriel & McKenzie, David, 2014. "The minimal impact of a large-scale financial education program in Mexico City," Journal of Development Economics, Elsevier, vol. 108(C), pages 184-189.
    4. Gill, Andrej & Juranek, Steffen & Lizarazo, Christian & Visnjic, Nikolai & Walz, Uwe, 2012. "Anreize, systemische Risiken und Intransparenz: Lehren aus der Finanz- und Staatsschuldenkrise," CFS Working Paper Series 2013/01, Center for Financial Studies (CFS).

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