Tuesday, June 21, 2011


Europeans used to refer to Americans as "peasants with money."  The whole thing speaks volumes.  But the fact that it has become easier for large numbers of people to become wealthy than to become refined also has an upside. 

It is similarly without irony that many critics lament that we have "too many choices."  And who decides how many toothpastes there should be?

It is perhaps inevitable that many Americans have accumulated assets faster than they have learned to manage them.  The currect economic troubles have provided ammunition for the critics.  And that story plays into the hands of those who are reluctant to let individuals manage their own choice of foods, health plans, retirement plans, etc.  Yes, some of us (many of us?) make mistakes, but is the polticization of our lives and wealth a good alternative? 

A third possibility is more and better financial education.  But a recent paper by Lauren E. Willis (linked here), "The Financial Education Fallacy" argues that it's not so simple. The student audience is in a state of "abysmal" financial ignorance.  Financial instruments are complex and constantly changing.  Rules-of-thumb have limited usefulness; personal financial differences are too complex.  Audience-tailored instruction would be very expensive.  And Willis' list goes on and on. 

What to do?  The author leans to better financial regulation.  But that poses as may challenges as the "more and better education" idea.  She even writes, "A society that is unwilling to pay for a K-12 education system that produces a populace that can perform basic math is not goint to pay for one that can do this and more."  That's a bad place to end.  Our education system does not underperform because it is "underfunded." 

I am always amazed by seemingly sophisticated writers who leave no room at all for standard public choice analysis and who fall back on the "more money" fix.

Given the choices, better to have peasants with money than the other kind.