Good news, but long overdue — the rise of personal finance economics

In April, Harvard University’s economics department for the first time led a Personal Finance workshop series for undergraduates. In May, Princeton students attended the university’s inaugural Financial Literacy Day, complete with T-shirts and consultations.

“I do think this is an environment that is very stressful for many students,” said John Y. Campbell, an economics professor at Harvard who taught the workshop. “There are long-term trends like the increase in inequality, rising student debt—they make students very mindful of the challenges they’re going to face.”

Kian Mintz-Woo, a postdoctoral research associate at Princeton who participated in the Financial Literacy Day, said he craves this kind of formalized instruction.

“We’re a generation that’s really shaped by some really poor macroeconomic decisions and it’s harder for us to think that there’s sort of exogenous progress in our lives and our livelihoods,” he said.

The Ivys are part of a growing trend to teach students about money. In the last decade, community colleges, public schools and state universities have started offering personal-finance programs to meet student demand, according to the Financial Security Project at Boston College.

More states are recognizing the importance of financial literacy at the high-school level. Nineteen states now mandate high schools to educate students on basic financial knowledge before they graduate, up from 17 states in 2018 and 13 in 2011, according to the Council for Economic Education.

That is from Julia Carpenter in the WSJ.

Comments

Always interesting to see when the economics profession oversees the distinction between accounting and economics.

Though who knows, maybe the age of behavioral bookkeeping is dawning around us.

I am going to be critical of you here, Professor Cowen. This is precisely the why many of us cannot understand the push toward online education for the masses. Is it not clear that we are setting up 2 systems. One where top universities, say the top 100, are able to offer these services (to probably already advantaged) students while the remaining universities offer an online guide.

Can't you see what we are setting up 20 years from now?

(Someone don't come back with the point that this is also offered in high schools -- that would be a red herring argument.)

To further the irony, the students we push into online education are precisely the ones whom are likely to benefit more from in-person financial tutoring.

This is getting frustrating.

People who attend college are already advantaged compared to majority who do not. It's typical middle class envy of the upper-middle class (who will actually need more complex wealth management services). Basic personal finance isn't that complicated.

"People who attend college are already advantaged compared to majority who do not." That's my point. And what does this have to do with envy?

The envy is complaining that the upper-middle class will get courses like the ones offered at Harvard and the middle class will have to make do with an online class.

"This is precisely the why many of us cannot understand the push toward online education for the masses."

Is there some counterfactual where if people weren't pushing low cost online education they could all obtain Harvard-type education? We live in a constrained world. Online education drastically lowers the cost of obtaining human capital.

"Is it not clear that we are setting up 2 systems. One where top universities, say the top 100, are able to offer these services (to probably already advantaged) students while the remaining universities offer an online guide."

Why would a school like, say the University of Vermont (#96 in the USWN rankings) be able to do this and UNC-Greensboro (#201) not? I am failing to see the distinction. I would venture to guess that community colleges provide more services in this area than elite universities because of the lack of wasteful pretensions.

The fact that the richest most prestigious university in the world offering a workshop on personal finance makes the WSJ should illustrate the silliness of the idea that elite universities are creating an overclass based on productivity improving skills and knowledge.

+1, I don't understand the foundation of RM's complaint.

Online education is available to everyone for a low cost. Sure, low skilled students would benefit more from tutoring, but that's tangential to the whole point. The lack of available tutoring makes the online courses more valuable, not less valuable.

Essentially the online material is the modern equivalent of the classic public library. Instead of learning any topic by reading a book, now someone can learn any topic by reading a boor or watching a video. It's hard to imagine how having additional choices is inherently bad.

Huh?? “Push into online ed”???? So if I don’t drop 200K on college and I can’t afford “in person tutoring” why bother ?? I take it you recently got a PHD and are unemployed or maybe just got your Series 7 and are looking for custys?

If you drop $200K on college without a workable & likely plan to obtain a high paying job, then it seems courses in personal finance are exactly what you should be studying.

I wonder how many college students realize that $200K is the equivalent of an inflation adjusted $580 per month forever. That, in order for that education to be worth while you need to make an additional $580 per month until you can raise the $200K to retire the opportunity cost. Furthermore, you lost 4 years of income, which at a minimum is an additional cost of $60K and probably realistically more like $90K+.

The first rule of personal finance is to not take out a huge nondischargeable student loan to get an education in personal finance at an overpriced university.

University education sharpens the ability to overlook the obvious and teaches students to make the simple complicated.

You want financial literacy? Buy Dave Ramsay's books and listen to his show. That's a lot cheaper and better than taking a course at a prestigious university.

Whoa now! Harvard gave out "free" T-Shirts*.

*T-shirts are NOT actually Free, but are included at no additional cost as part of your $48,000 per year cost.

When I was in junior high school in the 1970s all the girls were required to take "home ec" = home economics. The common stereotype is that they were taught cooking and sewing which is true, but the course also included basic nutrition and, lo and behold, "home economics": how to manage family finances and make a budget. Evidently it was taken for granted that managing money was the responsibility of the housewife. Subsequently they opened the course to boys (while opening "shop" to girls) and I think afterwards they discontinued it.

Home economics is actually more useful than what is called "economics". True story.

My wife taught home economics (now called Foods) and the material was very useful for high school students. It did have a reputation as a class for the less intelligent students. She used to work on her tests when we were in the car and I learned a few things, such as the difference between dry and liquid measures.

I was an econ major back in the late Stone Age. At that time, I thought economics was very useful. Judging by the papers that TC brings to our attention, economics seems to have become a branch of sociology and lost much of its value.

"When I was in junior high school in the 1970s all the girls were required to take "home ec" = home economics. ... Subsequently they opened the course to boys (while opening "shop" to girls) "

As a Freshman in the 80's, all the students in my state were required to take 1 semester of home economics & 1 semester of shop. Both of these were two of the most useful classes you can take per the amount of time invested.

I just checked and the state still requires 1 credit in Economics to graduate. Sadly, there's no mention of a shop requirement.

I get that Campbell really wanted to squeeze in that student loan debt talking point, but Harvard has need-based financial aid, allowing students to graduate with no debt. Why would Harvard students be worried about student loan debt?

"The Average Loan Amount for All Undergrads at Harvard University is $8,557 Per Year. 4.0% of all undergraduate students (including freshmen) at Harvard University utilize federal student loans to help pay for their college education, averaging $8,557 per year.

https://www.collegefactual.com/colleges/harvard-university/paying-for-college/student-loan-debt/#secUndergrad

“We’re a generation that’s really shaped by some really poor macroeconomic decisions . . . ." What decisions were those? If this generation is at the mercy of "really poor macroeconomic decisions", then what's the point of learning personal finance economics. To expect more "really poor macroeconomic decisions" and act accordingly? This certainly isn't an original observation, but those who owned assets at the bottom of the crisis and kept those assets and added to them have done remarkably well in the recovery as asset prices have soared. Those who didn't own many assets, which describes most of this young generation, didn't. If the purpose of teaching personal finance economics is to impart the benefits of investing in assets because asset prices will go up, well, sometimes tomorrow isn't just like yesterday. Yes, sometimes we are at the mercy of "really poor macroeconomic decisions". And yes, sometimes we are at the mercy of markets.

In the 70s I was offered the choice of personal finance or economics at my state school, and took the personal finance. So the option has been kicking around at least that long.

(Everything was cheap then. It would be kinda sad now to teach ROI and VaR only after the college loans are signed.)

"We’re a generation that’s ..."

Things may have changed but in my day the correct response to someone who claimed to speak for a generation was to boot him up the arse.

Must be a generational thing. Mine would never.

Harvard tuition is 47K/year[1]. It looks 5% of undergrad degrees are in victimhood studies, 38% in social sciences and psych [2].

With that in mind, read again how "this is an environment that is very stressful for many students" because of "long-term trends like the increase in inequality, rising student debt".

This problem is apparently due to "some really poor macroeconomic decisions" and has nothing to do with microeconomic decisions like spending 47K/year (+ 4 years of youth) on victimhood studies.

If you want to teach financial literacy to struggling kids, lesson (1) spend your youth acquiring marketable skills not studying sociology or victim studies, and lesson (2) don't borrow money unless you're investing it into a good ROI investment.

[1] https://college.harvard.edu/financial-aid/how-aid-works/cost-attendance
[2] https://www.collegefactual.com/colleges/harvard-university/academic-life/academic-majors/

Amazing! Stuff that people should know in 11th grade is now being taught at Harvard for $70K per year! Such good news!

Financial illiteracy among the 1% (minimum net worth in the USA of $10M and above) is not a bug, but a feature. All the rich I know are illiterate. Not kidding. For example: they don't buy fire insurance (self-insure) or even health insurance. They don't buy mutual funds but speculate on individual stocks (my favorite: my folks spent about $1M in 2007 buying GE, C, BAC, VIAB, CBS and PFE; , the first four being massive losers). They hold huge amount of cash for no good business reason but then gamble on penny stocks. They invest in "accredited investor" scams and hedge fund 20 and 2 fees. They are bat * crazy. Absolute insane. The Hunt brothers trying to corner the Ag market is another example. But, in a way, that's why they strike it rich. They are risk loving and the people that assume risk and never make it (the vast majority) die off, leaving, as a survivorship bias, these crazy rich folk. Sure, you do have smart rich folk but they seem to me to be the minority. GM Patrick Wolff, a hedge fund manager who won the US chess championship twice in the 1990s, probably has good stories on this theme, if he was allowed to tell them (probably cannot).

Bonus trivia: Kasparov-Wolff (1988, simul) 1.c4 e5 2.g3 Nf6 3.Bg2 c6 4.d4 exd4 5.Qxd4 d5 6.cxd5 cxd5 7.Nf3 Nc6 8.Qa4 Be7 9.0-0 0-0 10.Be3 Ng4 11.Bd4 Nxd4 12.Nxd4 Qb6 13.Nc3 Qh6 14.h4 g5 15.Nxd5 Bd8 16.Rac1 gxh4 17.Rxc8 hxg3 18.Nf3 Nh2 19.Rfc1 Rxc8 20.Rxc8 Nxf3+ 21.exf3 gxf2+ 22.Kf1 Qd2 23.Nf6+ Kg7 24.Ne8+ Kh8 25.Qe4 Bh4 0–1

On the other hand, Raj Chetty is taking a different approach in his introductory economics course at Harvard: https://www.vox.com/the-highlight/2019/5/14/18520783/harvard-economics-chetty

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