International Law

Is Teaching Financial Literacy a Waste of Time?

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Steve Dubner writes, over at the Freakonomics blog, about teaching financial literacy.

"Not long ago, I wrote about the sad state of financial literacy in the U.S., and how some people, like Annamaria Lusardi of Dartmouth, are proposing widespread education to fix the problem.

But in a brief Money magazine Q&A, Lauren Willis, who teaches financial-products regulation at Loyola Law School, says that's a waste of time. Excerpts:

Q: What's so bad about financial education?

A: It doesn't work. Sellers of financial products spend billions drowning out well-meaning messages to consumers from nonprofits or government agencies. Also, financial products are always changing -- credit and insurance products have changed dramatically in the past 20 years -- making it hard for educators to keep up. It's not like sex education. As far as I know, people get pregnant the same way they did when I was in high school.

Some of this I agree with.  

It is important when we consider what we can expect from a populace that has been subjected to information.

We are not going to get that much improvement, and it is foolsih to continue to rely on the idea that we can prevent fraud by "educating" the mass majority of investors - fraud is a trick performed on sometimes very educated people, which can no more be prevented that we can prevent a magician from tricking us.

But in the latter case we don't act on the illusions, no matter how complelling they are.  

Full post as published by Misleading Advertising Law on September 19, 2008 (boomark / email).