In a recent article for the Atlantic on the exuberantly optimistic investing that led to the housing meltdown, Yale economics professor Robert Shiller suggested that the government “should subsidize comprehensive financial advice for low- and middle-income Americans to help prevent bubbly thinking and financial overextension.”
Shiller explained that
“[f]inancial advice is in some respects like medical advice: we need both on an ongoing basis, and failure to obtain either can impose costs on society when our health—physical or financial—suffers.”
. . .
We also need to get better—and more—information to more-sophisticated investors and financial professionals.
It is an interesting idea: make it easier for consumers to get financial advice as a way of protecting the U.S. economy as a whole. This flies in the face of the “every man for himself” philosophy, but goes right along with the “we’re all in this together” philosophy.
But would it work? Surely, it all depends on the quality of the financial advice. Government subsidies could encourage a lot of shysters to get behind a desk and give bad advice to uninformed, low-income consumers.
In addition, many financial advisors are essentially salesmen for the products of their financial-services firm. Subsidizing financial advice may also subsidize Ameriprise, Thrivent, Wells Fargo, and other companies offering both financial products and advice. But assuming those companies offer worthwhile products, consumers—and, by extension, the economy—could benefit plenty, as well.
I do think that most low-income consumers would benefit far more than high-income consumers from a little financial advice. I think Shiller’s proposal deserves more consideration from elected officials, and possibly a pilot program to see whether it could create increased welfare overall.
Infectious Exuberance | The Atlantic Monthly
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{ 2 comments… read them below or add one }
Oh yeah, “…low and middle income Americans… had the …bubbly thinking…” and caused the current economic issues.
Whatever drugs “Yale economics professor Robert Shiller” is on must be good.
All those “low and middle income FREAKING BUBBLY THINKERS” caused the downfall of Bear Sterns and all the Bank failures so far.
Kinda shows you what a Yale Education is worth.
An interesting idea, Why don’t we ive economic advice to those who really really need it – the economists who advised BS and others.
Obviously, the governments fiscal genius is the answer… particularly this administration. All we have to do is print more and partner with big business to make it back.