Why an economist's new book on personal finance hardly talks about investments

The book has a striking dust jacket that's easily worth more than a thousand words. It shows a top hat with emerging rabbits made of origami-folded cash.

The book is Laurence J. Kotlikoff's "Money Magic: An Economist's Secrets to More Money, Less Risk and a Better Life."

Most offers of money magic come from investment managers. Their special hat, they say, will produce a multitude of investment rabbits. But every hat trick requires that you pay a fee. More important, the only lever on your future these magicians offer is a possible higher investment return.

Kotlikoff is different.

He's an economist, a professor at Boston University and a prolific researcher. Full disclosure: I've co-authored three books with Kotlikoff, two of them for MIT Press.

His money magic has almost nothing to do with investments. Indeed, other than inflation-adjusted Treasury bonds, there are few references to investments in the entire book. Instead, his money magic has everything to do with regular and very personal decisions real people make.

He deals with empowering choices we can make rather than investment returns that are beyond our control.

His magic isn't done with a wand. Instead, he uses the concept of "consumption smoothing" — the idea that we try to maintain an even keel of consumption throughout our lives. Then, using consumption-smoothing software, we can measure the impact of any of the decisions we make. In effect, we can measure the lifetime economic consequences of ordinary — but important — decisions.

Here are some examples:

His chapter on college education, by the way, should be required reading for everyone thinking about where to go to college. It gives an insider perspective on where the true value is.

I've written about this for decades. Many people take issue with this. They are correct in one respect. Kotlikoff assumes that everyone will live to age 100, an age that increases the value of Social Security relative to everything else. It's also a certainty that 98% of all people won't realize the full value of Social Security as he calculates it because they will die much sooner.

Skeptical? Then consider this. A National Bureau of Economic Research paper that measured the value of Social Security as a virtual asset found that its value was larger than the value of investments, home equity or defined-benefit pensions for all but the top 10% of all households.