Thanks for linking me to this. I am intrigued! This is your study, right? If I'm reading it right, you use machine learning to parse survey data and construct a measure of perceived self-reported financial well-being. Then use regression (did you build the model specifications using machine learning?) to find the effect of various variab…
Thanks for linking me to this. I am intrigued! This is your study, right? If I'm reading it right, you use machine learning to parse survey data and construct a measure of perceived self-reported financial well-being. Then use regression (did you build the model specifications using machine learning?) to find the effect of various variables on perceived financial well-being.
Here's the part I keep tripping over: you find a "negative relationship between financial literacy and economic outcomes." Would it be fair to say that you find that having better financial literacy makes your financial well-being worse? I mean, I you don't simply argue that financial education isn't money well-spent. That's an intuitive argument regardless of whether it's supported by data or not. But I'm having a tough time getting on board with the idea that there's really a causal "negative relationship between financial literacy and economic outcomes." Help me.
Hi Stephen, The negative relationship exists conditional on the other variables in the model. While initially a surprising result, Netemeyer found a similar result. There are a bunch of examples that can explain why financial literacy may not matter. For instance, higher-income individuals offload their financial affairs to advisors, and while they may be innately highly educated or entrepreneurial, they don’t care a lick about finance. We looked at heterogeneity on the income variable. Found no significant effect of financial literacy on the perception of economic outcomes of lower income, but a negative effect among higher income.
Could your results show an "ignorance is bliss" effect? People with more financial literacy are more aware when they're finances aren't what they think they should be?
Your results are surprising to me, because in all other studies I've seen better fin literacy is associated with better outcomes, and the best causal studies show an effect of fin literacy on positive fin behaviors.
There aren’t many causal studies where the effect is an economic measure. Behaviors, for sure, but not an economic outcome. The problem with behaviors is the researcher denotes what is a good or bad behavior, determined at the moment the survey respondent is answering the question, that imposes the researchers bias.
Thanks for linking me to this. I am intrigued! This is your study, right? If I'm reading it right, you use machine learning to parse survey data and construct a measure of perceived self-reported financial well-being. Then use regression (did you build the model specifications using machine learning?) to find the effect of various variables on perceived financial well-being.
Here's the part I keep tripping over: you find a "negative relationship between financial literacy and economic outcomes." Would it be fair to say that you find that having better financial literacy makes your financial well-being worse? I mean, I you don't simply argue that financial education isn't money well-spent. That's an intuitive argument regardless of whether it's supported by data or not. But I'm having a tough time getting on board with the idea that there's really a causal "negative relationship between financial literacy and economic outcomes." Help me.
Hi Stephen, The negative relationship exists conditional on the other variables in the model. While initially a surprising result, Netemeyer found a similar result. There are a bunch of examples that can explain why financial literacy may not matter. For instance, higher-income individuals offload their financial affairs to advisors, and while they may be innately highly educated or entrepreneurial, they don’t care a lick about finance. We looked at heterogeneity on the income variable. Found no significant effect of financial literacy on the perception of economic outcomes of lower income, but a negative effect among higher income.
Could your results show an "ignorance is bliss" effect? People with more financial literacy are more aware when they're finances aren't what they think they should be?
Your results are surprising to me, because in all other studies I've seen better fin literacy is associated with better outcomes, and the best causal studies show an effect of fin literacy on positive fin behaviors.
There aren’t many causal studies where the effect is an economic measure. Behaviors, for sure, but not an economic outcome. The problem with behaviors is the researcher denotes what is a good or bad behavior, determined at the moment the survey respondent is answering the question, that imposes the researchers bias.
Well, the behavioral studies don't usually use surveys, which I think is often a strength. They observe outcomes.
Anyway, all research methods come with trade-offs. I'm glad we have all different types of studies on this. It gives us a richer view of the topic.