Fixing Finance: A Fresh Look at America's Money Woes

America's financial literacy is lacking, and the system isn't helping. Many people struggle with retirement planning, home buying, and other big money decisions. The shift from pensions to 401(k) plans has made things more complicated. Harvard's John Campbell and Imperial College London's Tarun Ramadorai argue that small changes, or "nudges, " aren't enough. They say we need bigger changes, or "shoves, " to fix the system. The current system is too complex for many people. Even with automatic enrollment in 401(k)s, millions are still unprepared for financial challenges in old age. Campbell and Ramadorai propose a "starter kit" of simple, safe, and cheap financial products. They want to make personal finance more like buying medicine—clear, straightforward, and easy to compare. Teaching personal finance in high school isn't the solution. The problem is the complexity of financial products, not a lack of education. People face an uneven competition with the financial sector, which is focused on profit. Campbell and Ramadorai argue for stronger regulation to ensure fair and simple financial products. They suggest a universal retirement account that people can carry throughout their careers. This would solve the problem of multiple accounts and low contribution limits. They also propose making mortgages portable, allowing people to take their low-interest rates with them when they move. This would increase mobility and keep the labor market functioning well. Critics might argue that more regulation would stifle innovation. But Campbell and Ramadorai point out that some areas, like civil aviation and utilities, need regulation to ensure safety and fairness. They believe personal finance is just as important and deserves the same attention.