Cognitive decline, limited awareness, imperfect agency, and financial wellbeing
Professor Matthew Shapiro presents a 2024 Fred Gruen public lecture.
Hosted by The Australian National University Research School of Economics.
Cognitive decline may lead older individuals to make poor financial decisions. Preventing poor decision making may require timely transfer of financial control to a reliable agent. Cognitive decline, however, can develop in ageing individuals without notice, creating the possibility of suboptimal timing of the transfer of control.
In his lecture, Matthew expands on his paper, which presents survey-based evidence that older individuals possessing significant wealth regard suboptimal timing of the transfer of control – in particular, a delay due to unnoticed cognitive decline – as a substantial risk to their financial wellbeing. He touches on the theoretical framework in his paper to model this lack of awareness and the resulting welfare loss.