James Surowiecki on Financial Illiteracy

James Surowiecki writes about one of this blog’s frequent topics of interest: financial illiteracy. Surowiecki includes insights from Annamaria Lusardi‘s research and Gary Rivlin‘s new book, Broke, USA. He proposes a “a financial equivalent of drivers’ ed” and points out that “[i]f financial education taught people only how little they actually know, it would accomplish quite a lot.”[%comments]

Dr. Dude

I think Errol Morris's posts would argue that the ignorant don't and can't know how ignorant they are. My father is a fairly intelligent person, but he embodies every weakness described by behavioral economists. I tried for years to explain that he didn't really make much money selling his house, but the concept of inflation totally went over his head. He trades options, but doesn't understand the risks of a naked call/put (he nearly got crushed in the flash crash). The problem is that when my explanation undermines his feeling that he's an ace investor, he assumes I'm over-complicating things. If he makes just $10 in the market, it validates his limited financial views. Thank goodness he's got Social Security and a pension.


Start with Congress...


Some interesting background for your Econ/Per Finance course.