Over the winter holiday break I emailed Nobel Prize Winner and former Princeton professor Daniel Kahneman. I'm passing through New Jersey, I said, want to meet up to discuss the intersection of cognitive psychology and financial education for children? He couldn't resist an offer like that!
Unfortunately, DK was in CA so no dice. Before wishing me happy holidays he added, "I don’t think I have much wisdom to offer on your problem which sounds difficult."
When the man who won a Nobel Prize based on work regarding optimism bias tells you he thinks what you are doing is difficult I reckon he's not exaggerating. Either that or he's too nice to tell a stranger to sod off.
But as the New York Times Magazine noted on January 10th (hat tip to Chris Smith at New York magazine) when discussing the marshmallow experiment, there are often too many factors to take into consideration regarding such matters and that results of studies will have their caveats.
So should social scientists, teachers, and I put down our pens and stop trying altogether? By no means. More than any other time we are learning -daily, it seems - what makes the brain tick. Till the dust settles, the best I can do is move forward with the best information available.
This spring that means teaching a financial education class to parents and children. Out goes the marshmallow experiment. Out also are more hard and fast financial education lessons. Between studying the issue and experiencing it in class, I have come to believe that people fundamentally understand how markets work and capitalism in general. Rather, it is our biases and our lazy minds that make for poor financial decisions.
In response, the classes will address cognitive psyche, particularly anchoring, the availability bias, framing, loss aversion, optimism bias, the peak-end rule, the planning fallacy, and, if the parents are good, the cumulative prospect theory.
Of course, the mere mention of any of these by name would overwhelm or confuse most folks. Understandably so. Instead, I'll pack the psyche talk into kids books that the parents and kids can read and illustrate together. Each class will address a different bias or heuristic, how it messes with our daily financial decision-making, and how we can break out of the bias through the adventures of Pablo Plata, Riley Roo, Basilio the Boxer, and a host of other animals.
Was it over when the Germans bombed Pearl Harbor? Not by a long shot. And so it's back to the classroom.
