Consumer literacy

Abstract

The goal of consumer policy is often to improve the functioning of markets in which consumer needs are not being met. Yet we know that consumers do not always act in their own best interests and often face detriment because of this. This paper explores the gap between the consumer capabilities of real consumers and those of the ideal consumer on which economic theory is based. By measuring what we call ‘consumer literacy’ – a combination of skills, knowledge and engagement – we find that only one in 250 consumers even approaches the ideal model, and that those most likely to are older, more educated and have a higher income. The research finds that older people score well because they are more likely to be engaged with their consumption. The paper concludes with a discussion of some of the issues sparked and questions raised by these findings.