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Restoring Rational Choice: The Challenge of Consumer Financial Regulation

John Campbell ()

American Economic Review, 2016, vol. 106, issue 5, 1-30

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-codes: D14 G18 G28 L51 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.p20161127
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Working Paper: Restoring rational choice: The challenge of consumer financial regulation (2016) Downloads
Working Paper: Restoring Rational Choice: The Challenge of Consumer Financial Regulation (2016) Downloads
Working Paper: Restoring Rational Choice: The Challenge of Consumer Financial Regulation (2016) Downloads
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