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94 Iowa L. Rev. 197 (2008-2009)
Against Financial-Literacy Education

handle is hein.journals/ilr94 and id is 199 raw text is: Against Financial-Literacy Education Lauren E. Willis* ABSTRACT: The dominant model of regulation in the United States for consumer credit, insurance, and investment products is disclosure and unfettered choice. As these products have become more complex, consumers' inability to understand them has become increasingly apparent, and the consequences of this inability more dire. In response, policymakers have embraced financial-literacy education as a necessary corollary to the disclosure model of regulation. This education is widely believed to turn consumers into responsible and empowered market players, motivated and competent to make financial decisions that increase their own welfare. The vision created is of educated consumers handling their own credit, insurance, and retirement planning matters by confidently navigating the bountiful unrestricted marketplace. Although this vision is seductive, promising both a free market and increased consumer welfare, the predicate belief in the effectiveness of financial-literacy education lacks empirical support. Moreover, the belief is implausible, given the velocity of change in the financial marketplace, the gulf between current consumer skills and those needed to understand today's complex nonstandardized financial products, the persistence of biases in financial decisionmaking, and the disparity between educators and financial-services finns in resources with which to reach consumers. Harboring this belief may be innocent, but it is not harmless; the pursuit of financial literacy poses costs that almost certainly swamp any benefits. For some consumers, financial education appears to increase confidence without * Associate Professor, Loyola Law School, Los Angeles. Helpful comments and suggestions from Anita Allen, Jennifer Arlen, Regina Austin, Oren Bar-Gill, Jean Braucher, Dorothy Brown, Erik Gerding, Alexandra Natapoff, Chris Sanchirico, Reed Shuldiner, and participants at talks given at the NYU Law School Law and Economics Colloquium, the University of Pennsylvania Law School Faculty Workshop series, the 2008 Annual Meeting of the Association of American Law Schools, the 2008 Federal Reserve Bank of Cleveland Policy Summit, the 2007 Jurisgenesis Conference at Washington University in St. Louis, the 1 1th International Conference on Consumer Law in Cape Town, South Africa, and the 7th International Conference on Financial Services in Brussels, Belgium, are gratefully acknowledged. Much thanks also to Stacy Wiesbrock, John Ohanesian, Leigh Ferrin, and Laura Cadra for research assistance.

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