Why Banks Should Beware of “Misbehaving”

The purpose of this paper is to outline the impact of behavioral economics on public policy by examining its central influence on the Consumer Financial Protection Bureau. In particular, it explains how behavioral ideas have been converted into policies that fail to account for actual government practice, which has led to mixed results for consumers. While understanding just how people are susceptible to market influence is important, the premature application of behavioral economics to public policy risks undermining the goal of helping consumers.

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