Per­son­al and House­hold Fin­ance: from learn­ing how to be­come rich, to design­ing pub­lic policies

Course content

Course content:

Financial education is lacking in most countries, developed countries included. The main goal of the course is to develop an integrated framework of household finance for private and public use. Students will learn how to maximize their intertemporal utility given their life-cycle income, how to become rich if they want to pay the price for it, how to save, borrow, and purchase property (and if they should do it at all), and more. In terms of public policy, students should leave the course with a holistic view of wealth and income inequality, how poverty restrict sound financial decision-making and how policies can improve social outcomes by reducing (or increasing!) income inequality. 
 
The first goal of the course is to develop a sound integrated framework for individuals to manage their finances with a long-term horizon in mind (based on the permanent income hypothesis). Such a framework does include learning how to integrate bitcoin and other digital currencies and derivatives in long-term portfolios (although that is not the main focus of the framework). Secondly, we will analyze the impact of credit restrictions and hyperbolic discounting in household financial management in poor and middle-income countries. Finally, we will investigate the role of public policy in improving household financial decisions. Importantly, household finance is stuck in low-value equilibria where people's inability to save and invest efficiently lead to lower productivity growth and value added for all. In this final module, we will explain the determinants of wealth and income inequality and how economic policies can improve social outcomes. 

Course structure:
 
Class 1 Life-cycle income hypothesis: do you want to be rich? 
Class 2 Financial markets and investment strategies. 
Class 3 Financial markets and investment strategies: should you buy a house? 
Class 4 Digital currencies and derivatives: leveraging at which cost? 
Class 5 Financial Literacy in poor and rich countries. 
 
Feedback: Approval of final paper. 
 
Class 6 Credit constraints, hyperbolic discounting and making choices while poor.  
Class 7 Poor economics and policymaking. 
Class 8 Wealth and income inequality. 
Class 9 Savings glut, pension funds and public policies in rich countries. 
Class 10 The Sustainability Credit Score System and green finance. 
Class 11 Comprehensive Review.