Popular Financial Advice vs. Economic Theory

Economists have developed rich theories for how people should manage their financial lives – investing decisions, savings decisions, borrowing decisions, etc. But how well do these theories match the financial advice found in books written for the general public? If there is a large mismatch between economic theory and popular beliefs, could this help explain observed behavior that established theories fail to predict?

This project involves reading the relevant sections of the top N best-selling financial advice books and classifying the types of advice they give on specific financial topics. The first part of the RA’s summer will involve learning what economic theories have to say about these domains so that they can assess how well the popular financial advice matches up with theory.

The project is well-suited for any student who is interested in increasing their general financial literacy. In addition, the project is intended to be a hypothesis-generating endeavor, as we will be examining many different domains of financial choices, so it may be useful for somebody looking for a senior essay idea.