Working Paper: NBER ID: w20618
Authors: Sandro Ambuehl; B. Douglas Bernheim; Annamaria Lusardi
Abstract: We examine methods for evaluating opportunity-neutral interventions designed to improve the quality of decision making in settings where people imperfectly comprehend consequences. In an experiment involving financial education, conventional outcome metrics (financial literacy and directional changes in behavior) imply that two interventions, one with practice and feedback, one without, are equally beneficial even though only the first reduces average bias. We trace these evaluative failures to violations of implicit assumptions. We propose a simple intuitive outcome metric that properly differentiates between the interventions, and that is robustly interpretable as a measure of welfare loss even when consumers suffer from other biases.
Keywords: financial education; decision making; welfare analysis; deliberative competence
JEL Codes: D14; D91; I21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| educational intervention with practice and feedback (J24) | average bias in financial decision making (G41) |
| intervention without practice and feedback (C90) | average bias in financial decision making (G41) |
| educational intervention with practice and feedback (J24) | understanding of compound interest (E43) |
| intervention without practice and feedback (C90) | underestimation of compound interest (E43) |
| proposed measure of deliberative competence (D79) | welfare loss associated with poor decision making (D91) |