Financial Education Delivery

Title

Nudging Debt: On the Ethics of Behavioral Paternalism in Personal Finance

Document Type

Journal Article

Publication Date

11-2017

Keywords

financial-behavior, psychological-well-being, borrowing, consumer-finances

Abstract

In recent years, experimental psychology and behavioral economics have cast doubt on the quality and reliability of individual decision making, especially in complicated choice contexts involving risk and time. These factors imply that financial decision making is particularly subject to such doubts, which has generated calls for increased regulation based on behavioral science to help people avoid imprudent decisions regarding borrowing, such as those implemented by the relatively new Consumer Financial Protection Bureau. This article argues that such interventions are fraught with ethical problems based on the regulators’ inability to appreciate the complex, multifaceted, and subjective interests of borrowers and recommends alternative approaches to helping people make better borrowing decisions while respecting their personal interests.

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