# Book Review: *Fixed* Fall 2026 • Regulation By Phil R. Murray [ Download PDF ](https://www.cato.org/sites/cato.org/files/2026-09/regulation-fall-2026-article-in-review.pdf) Unless you’re in on it, no one likes playing a game that is “fixed”—that is, “one that works to the advantage of those operating the system in a way that is unfair and imperfectly understood by the victims.” That description comes from economists John Y. Campbell (Harvard) and Tarun Ramadorai (Imperial College London) in their recent book *Fixed*. They argue that personal finance is rigged and government should address it. They want “broader structural reform of the financial system to simplify the financial challenges facing households.” ***Acumen vs. naivete*** / Financial naivete is common, they note. Campbell and Ramadorai tell of five unfortunate individuals: One borrowed money for higher education but ultimately did not graduate. A second put everything in the stock of his employer, Enron, and his nest egg evaporated when it went bankrupt. A third put nearly all her money in the money market only to have her interest income dwindle when the Federal Reserve lowered short-term interest rates. The fourth and fifth bought useless financial products “bundled” with other financial products. Unlike those unfortunate five, wealthy people possess financial acumen. The wealthy, the authors maintain, receive higher rates of return when investing, pay lower interest rates when borrowing, and save larger shares of their incomes. In the authors’ view, the market for personal finance both causes and reinforces differences in the quality of financial choices we make as well as the inequality of wealth that results. They explain why many borrowers and investors struggle to exercise good judgment. We make choices today without feedback until years from now. The choices we make are risky, but we do not necessarily know how risky they are. Campbell and Ramadorai write: > Information to support wise choices, such as expert forecasts of future outcomes (from interest rates to geopolitical trends to climate change), is highly valuable, but access to such information is not available to or easily interpreted by all. Furthermore, knowing the benefits, costs, and risks is not enough to properly execute. It takes discipline to refrain from excessive debt and to regularly save. According to Campbell and Ramadorai, people underestimate the benefits of good options such as annuities, and they overestimate the benefits of bad options such as lottery tickets. Given the “difficulty many people have with numerical thinking,” they are no better at estimating costs. Capitalism is tainted because “the financial system supplies too many products with exaggerated benefits and too few products with underappreciated benefits,” and it also “supplies too many products with hidden costs.” Sellers of financial services give consumers what they want. But—as the authors see it—consumers don’t know what is in their best interest, so the market fails. Nor can consumers rely on financial professionals to learn what’s in their best interest because of a “conflict of interest”: > Many financial advisers receive compensation from financial product providers as well as their clients, and only some advisers have the legal obligation, known as “fiduciary duty,” to place their clients’ interests above their own. Instead of engaging with conventional financial institutions, individuals may hoard or else borrow and lend with neighbors, relatives, or shadowy figures. Those options are probably worse than conventional finance. People make mistakes that limit their success in the financial markets as investors. They buy high on the expectation that prices will continue rising, they neglect to diversify, and they sell low on the expectation that prices will never recover. They insure against “small risks” such as the cost of repairing an appliance, and they fail to insure against “big risks” such as an untimely death. When they do buy insurance, they opt for expensive, low-deductible policies and are likely to lose coverage by not paying the premiums. ***Technological innovation*** / Technological progress in the provision of financial services helps consumers. For example, providers can operate at lower administrative costs and tailor products to consumers’ preferences and tolerances for risk. Consumers can more easily evaluate alternative products. There are drawbacks to innovation, however. Technology enables providers “to encourage gambling, performance chasing, or impulse buying.” While working with online financial service providers, consumers reveal information that may be used to charge them higher prices. Consumers might not grasp what new technology offers. For instance, cryptocurrency exchanges “are virtually unregulated and have frequently defaulted, leaving their customers as unsecured creditors of a bankrupt financial institution.” To promote the good effects of financial innovation and discourage the bad, Campbell and Ramadorai recommend “regulatory sandboxes” in which firms introduce their innovations to a random sample of the population. Regulators may learn the unintended consequences of innovation through controlled observation. The authors put forth “regulatory principles” to assess the merits of new technology. Consider this prescription: > If closer investigation turns up excessive gamification, marketing strategies that encourage frequent comparisons with peers to stimulate additional buying and usage, nontransparent fees, or excessive difficulties in canceling subscriptions, regulators should intervene. The authors do not define “excessive,” “frequent,” or “nontransparent.” They describe what they mean by intervention: “We call this ‘shoving’ the system: using the powers of government to curb abuses and encourage the development of better financial products.” Campbell and Ramadorai want to “shove” people by “requiring disclosures” and implementing “tax incentives, price caps, and restrictions on who can use certain financial products.” They approve of the “Schumer Box,” which requires disclosure of interest rates on credit card transactions. In fact, they want the box to include additional disclosure of interest, fees, and costs in dollar amounts, which, they presume, are easier to understand. But requiring disclosure is not enough to help people make better decisions. Thus, Campbell and Ramadorai endorse using the tax code to reward people for saving and to reward businesses for encouraging employees to save. They also favor legal maximum interest rates. As economists, they recognize the problem with this: “They should not be set so low that they cause a collapse in the supply of credit to small borrowers.” But they do not tell us how low legal maximum interest rates may be set without causing a shortage of credit. Finally, the authors are comfortable prohibiting “unsuitable products” or prohibiting poor, financially unsavvy people from buying them. ***Starter kit*** / The centerpiece of the book is the “financial starter kit: a set of basic financial products.” Those products include: - checking account - savings account - short-term loans - loans for education - mortgages - short-term insurance - life insurance - retirement savings account - target date retirement funds - annuities - reverse mortgages Campbell and Ramadorai want the government to mandate checking accounts. They argue that “less sophisticated people don’t perceive the true costs of their transaction accounts,” which is the rate of interest in the money market they forsake. They propose this “more transparent fee structure”: a fixed dollar amount per year, plus a percentage of the average amount in the account, plus a fee for every transaction. The authors believe this fee structure would enable bank customers to more easily compare the costs of checking accounts at different banks. Campbell and Ramadorai want consumers to have access to short-term loans. They would be pre-approved and pay a fixed fee plus an interest rate. However, “there should not be fees like bank overdraft transaction charges or credit card late fees that impose substantial penalties for small increases in debt or small delays in payments.” Without incentives to refrain from writing bad checks and making late payments, we may expect people to write more bad checks and make more late payments. Their financial starter kit would offer fixed-rate and adjustable-rate mortgages. The fixed rate would not be fixed indefinitely; if interest rates fall, “the rate reduces automatically,” which sounds like an adjustable-rate mortgage. Readers wondering whether the fixed rate would move upward when interest rates rise will not find out from the authors. Lenders would be prohibited from using “teaser rates” to entice borrowers to take out adjustable-rate mortgages. The authors approve of “assumability” and “portability” features for mortgages. Assumability is “where the buyer of the house takes over the seller’s mortgage, subject to a credit check on the buyer.” Portability is “where the seller carries their old mortgage with them to their new house, subject to a valuation of the new house.” Both features counteract the reluctance of homeowners with low fixed-rate mortgages to sell when current mortgage rates are high. Although assumability and portability are interesting ideas, readers expecting a discussion of unintended consequences will not get one. After listing what their starter kit would and would not have with respect to borrowing, the authors turn to retirement saving. They want individuals to have a retirement account beginning with their first job. To give individuals more incentive to save, “capital income earned in the account should not be taxed.” In return for the favorable tax treatment, there would be less choice over which assets may go into the retirement account. They would allow “target date funds,” which are more heavily weighted toward stocks while individuals are young and become more heavily weighted toward less risky bonds and money market instruments as individuals near retirement. Regulation would mandate that the funds charge “low fees and costs.” They do not specify how low. The funds would be index funds. Individuals would not be able to hold individual stocks nor “illiquid assets such as real estate and private equity.” Much of what Campbell and Ramadorai recommend is good advice. Unfortunately, their penchant for imposing their preferences through government regulation comes across as priggish. ***Conclusion*** / The book does contain a few errors. When explaining Bayesian probability, they assume that the probability of a successful medical innovation is 5 percent. They assume that “this analyst has correctly predicted the outcome of a medical development 90% of the time.” This means the probability the analyst predicts success given that the innovation works is 90 percent, and the probability the analyst predicts failure given that the innovation fails is 90 percent. Then they state: > Since the analyst erroneously calls 10% of the 90% of startups that fail, 9% of the analyst’s positive predictions are true. Since the analyst correctly calls 90% of the 10% of startups that succeed, another 9% of the analyst’s positive predictions are true. That is inconsistent with their assumption that 5 percent of medical innovations will succeed. If the probability of success is 5 percent, the analyst will incorrectly predict that 10 percent of the *95 percent* of the innovations that fail will be successful. And the analyst will correctly predict that 90 percent of the *5 percent* of innovations that succeed will be successful. They appear to have replaced their initial assumption of a 5 percent success rate with a 10 percent rate. Another mistake: They count “living expenses” as a cost of higher education. Expenses such as food and lodging are incurred regardless of the choice of obtaining a higher education. Also, the net returns on higher education that they calculate are at least slightly biased upward because they neglect to include the cost of foregone income. Campbell and Ramadorai argue that “the market economy” is “the best system we know of to create widespread prosperity.” They acknowledge that regulations may be bad and oppose “public provision of financial services.” But their litany of prescriptions for the market may fail to simplify the decision-making process. Take their idea for handling emergency withdrawals from retirement accounts: “structure withdrawals as amortizing loans that retirement savers make to themselves, with a rate of interest equaling the rate of return earned on the balance of the retirement account that is not withdrawn.” Will individuals who cannot understand the cost of owning a checking account understand that? They disapprove of bundling until they see a rationale for it: selling insurance for disability, elderly care, and a long life. They condemn “gamification” until they see a rationale for it: “Such products can encourage saving by exploiting the excitement many people feel when they gamble.” Perhaps the authors prefer shoving people in the market because they might be unsuccessful at testing their ideas in the market. *Fixed* is a frustrating book to read, not because it is wrong about the problem, but because it is so incurious about the costs of its own solutions. Campbell and Ramadorai are gifted economists who understand markets well enough to catalog their failures with precision and authority. But they do not apply the same rigor to government. Every mandate, cap, prohibition, and “shove” they prescribe carries its own risks of unintended consequences, its own potential for capture, and its own implicit assumption that regulators will be wiser and more disinterested than the market participants they are replacing. A book that opens by decrying a system “fixed” in favor of insiders might have asked with equal seriousness, “Who fixes the fixers?” ### Download This Regulation Article ##### Book Review: *Fixed* [ Download PDF ](https://www.cato.org/sites/cato.org/files/2026-09/regulation-fall-2026-article-in-review.pdf) ##### About the Author ##### Phil R. Murray Professor of Economics, Weber International University [ Download PDF ](https://www.cato.org/sites/cato.org/files/2026-09/regulation-fall-2026-article-in-review.pdf)