How to live with a financially illiterate population
John Carney is right: a very large number of Americans is always going to be financially illiterate, and there’s nothing we can do about it. Indeed, if we try too hard to do something about improving financial literacy, there’s a good chance we’ll only end up creating a new cohort of overconfident financial illiterates who think they understand things when they don’t.
This is why we need a Consumer Financial Protection Agency: to make sure that people buying financial products don’t end up buying something that’s going to end up exploding in their face. As Elizabeth Warren so frequently says, we do it for toasters, we should be able to do it for mortgages and toasters and annuities. There’s a decent case to be made that we can and should give a decent financial education to people starting up small businesses. But there’s not much empirical evidence that it works for people more generally.