Restoring Rational Choice: The Challenge of Consumer Financial Regulation
62 Pages Posted: 22 Jan 2016 Last revised: 7 Jun 2016
There are 3 versions of this paper
Restoring Rational Choice: The Challenge of Consumer Financial Regulation
Restoring Rational Choice: The Challenge of Consumer Financial Regulation
Restoring Rational Choice: The Challenge of Consumer Financial Regulation
Date Written: March 1, 2016
Abstract
This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products, and that it contributes meaningfully to the evolution of wealth inequality. The lecture uses a stylized model to discuss the welfare economics of paternalistic intervention in financial markets, and discusses several specific examples including asset allocation in retirement savings, fees for unsecured short-term borrowing, and reverse mortgages.
JEL Classification: D12, D18, G28
Suggested Citation: Suggested Citation