First reaction to Mike’s post on financial education: education is paternalism. To wit, Mankiw’s views of economics education are exactly like a Marxist’s need to raise his students’ consciousnesses. We have views we think our students should have. There are “good” views and there are “bad” views. I think we’re going to have to live with this sort of paternalism.
Second, financial education, and personal finance in particular, IS NOT economic education. Personal finance is about individuals making decisions about particular goods and services. Economics is about how many people’s decisions aggregate up into market behavior. Like waaay different.
Third — and here’s the lazy connection with the Robin Hanson post — financial education is just an instance of rationality education. If students could learn to be more rational (and they use that reason), they would be better consumers of finance when they get out in the world. Because some students aren’t smart enough and most aren’t so inclined, they can’t be taught to be more rational in general. So, financial education needs be a set of rules of thumb with a sprinkling of general principles.
Example: everything you need to know about interest rate calculations is taught to you in 6th grade math class. Because students are too dumb or disinclined to care, they don’t make the connection. So we need to teach them specifically how to calculate the interest payments on credit cards and point out to them how many big screen tv’s they won’t get to buy if they rack up their credit card balances.
The guiding principle would be to teach rules of thumb that, if followed, would lead to people making the least bad mistakes, e.g. its better to scare the bejeezus out of students about credit cards even if it leads them to forgo getting them. That said, people learn from mistakes so we shouldn’t aim to prevent all mistake making.
Aside: I consider myself a pretty staunch anti-paternalist… the big fight with the Real Scientist right now is over whether we should cut checks to poor people or buy health care for them. She says, and I’m paraphrasing only a little, “they’re too dumb to buy health insurance themselves so we have to do it for them.” I say that I’d hate to be treated that way, like a child, and so we should just give income subsidies to the poor and let them figure out what goods and services they need to buy.
Anyway, I’m an anti-paternalist EXCEPT when it comes to education and specifically when it comes to teaching people how to think. To me, it better for people to learn to think for themselves than for others to think for them. A second best: people should at least act like they’re thinking for themselves (i.e. following rules of thumb). At least in this case, there’s at least a chance that people will learn to think for themselves and become more rational.
In all three cases, though, paternalism is involved.