Consumer Finance Taught for First Time to Harvard MBAs
Harvard Business School is one of the first top business schools to add a consumer finance course to its offerings.
Ironically, as course instructor Peter Tufano points out, the typical HBS MBA would have analyzed financial statements from hundreds of companies, but never studied the financial records of even a single household. The disconnect: consumer spending drives the economy, and households account for $61 trillion in assets.
That was remedied when Tufano introduced the course earlier this year, co-teaching with Harvard Law professor Howell E. Jackson.
"We begin by having them analyze real numbers for real household budgets," Tufano says in this interview with the HBS Alumni Bulletin. "We also bring in concepts from behavioral economics, psychology more broadly, and sociology. We have cases and materials that are at the household level, because we think that before you can discuss business practice or public policy, you must first understand households."Students also learn about the institutions that serve consumers including banks, insurance companies and credit card issuers. They design a budget for an average Boston family, figuring expenses for food, transportation and insurance.
Tufano hopes to build a field of academic study around the consumer. In an article in the current issue of Harvard Business Review, written with Annamaria Lusardi, Tufano suggests that companies should help employees achieve a basic level of financial literacy, such as understanding how debt works.
"Piling up credit card debt at rates of 18% or higher while investing a small fraction of weekly pay into a 401(k) may not be the best way for an employee to achieve financial well-being."If you were going to teach MBAs the basics about how consumers save and spend, where would you begin?