Insight: COGNITIVE ABILITY, IRRELEVANT INFORMATION, AND OTHER CONTRIBUTORS TO FINANCIAL MISTAKES
By Emerson Sprick
IDEAS IN THE INSIGHT YOU CAN PUT INTO ACTION
These two articles outline the possibilities that researchers have explored to understand why consumers make suboptimal financial decisions. The articles find significant support for the hypothesis that cognitive ability, or general intelligence, plays an important role, as does the influence of social networks and other information that might seem to be irrelevant to financial decisions. The authors suggest that financial education often fails to promote better decision-making and that regulatory efforts have not succeeded in consistently improving decision-making, which complicates efforts by the government to help Americans achieve better financial outcomes.
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About the Author
Emerson Sprick is a policy analyst at the Bipartisan Policy Center in Washington, DC. He earned a master’s degree in economics from Georgetown University and a bachelor’s degree from the University of Missouri.