Campbell and Ramadorai aren’t consumer activists but card-carrying members of the economics establishment who’ve spent much of their careers studying how ordinary people make financial decisions

A reverse Robin Hood dynamic is playing out in the world of personal finance, with the mistakes of the poor lowering costs for the rich. Economists John Y. Campbell and Tarun Ramadorai aim to call attention to the issue with their new book, Fixed: Why Personal Finance Is Broken and How to Make It Work for Everyone. The authors say common mistakes made by lower-income, less financially savvy consumers result in cross-subsidies enjoyed primarily by the wealthier users of financial products.

YESSSS, TEN POINTS TO DEN!

Some costs come when people break obvious rules, such as missing a payment. But for many consumers, financial products present a maze of special conditions and unclear penalties to begin with.

Campbell and Ramadorai also note that the personal finance system contributes to wealth disparity, particularly between the rich and the middle class. This stems in part from the higher returns wealthy people earn on their savings, their higher savings rates (possibly due to those higher returns), the lower rates they pay on debt and their ability to better diversify risks

Campbell argues that the current state of personal finance has put capitalism at risk. “When people figure out some of the rigged elements of the system, they become very angry and sort of disillusioned and distrustful of finance,” he says. “I think the distrust of finance has spread to a broader distrust of capitalism, and that’s a real problem.”