TY - RPRT T1 - Cognition and Wealth: The Importance of Probabilistic Thinking Y1 - 2001 A1 - Lee A. Lillard A1 - Robert J. Willis KW - Health Conditions and Status KW - Net Worth and Assets AB - Proposed reforms of Social Security that expand household choice and private sector trends away from defined benefit pension plans toward defined contribution plans offer new financial planning options. Although these options have many potential benefits for households, critics argue that many people will fail to make choices that exploit them, and, consequently, that expanded choice will increase the risks of poverty for some populations. Subjective probabilities are key in models of optimal financial planning, yet little is known about the capacity of individuals to use probabalistic thinking in this area. In the research reported here, we used a battery of subjective probability questions administered to more than 20,000 people in the Health and Retirement Study to investigate how probabalistic thinking affects portfolio choices and net worth. Our objectives are to develop a measure of competence in probabilistic thinking and to link this measure to risk aversion and financial outcomes. PB - Michigan Retirement Research Center at the University of Michigan CY - Ann Arbor, MI UR - https://www.ssc.wisc.edu/~jkennan/teaching/Lillard-Willis_RAND1.pdf U4 - Cognition/Wealth ER -