NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Sandro Ambuehl

Department of Management UTSC
Rotman School of Management
University of Toronto
105 St. George Street
Toronto, ON, M5S 3E6
CANADA

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NBER Working Papers and Publications

October 2014A Method for Evaluating the Quality of Financial Decision Making, with an Application to Financial Education
with B. Douglas Bernheim, Annamaria Lusardi: w20618
We introduce a method for measuring the quality of financial decisions built around a notion of financial competence, which gauges the alignment between consumers choices and those they would make if they properly understood their opportunities. We prove our measure admits a formal welfare interpretation even when consumers suffer from additional decision-making flaws, known and unknown, outside the scope of analysis. An application illuminates the pitfalls of the types of brief rhetoric-laden interventions commonly used for adult financial education: they affect behavior through unintended mechanisms, and hence may not improve decisions even when they perform well according to conventional metrics.
 
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