What is the Age of Reason?

David LaibsonJohn C. DriscollSumit Agarwal Xavier Gabaix

IB#10-12

The brief’s key findings are:

  • Individuals make the most effective financial decisions in middle age, resulting in lower fees and interest rates on credit and loan transactions.
  • Financial performance declines for older adults, raising a potential concern as the retirement system has shifted more decisions to individuals.
  • A range of policy responses is possible – from improved disclosure of financial products to stricter regulatory review.
  • Any response should carefully weigh the costs as well as the benefits.