Threshold Concepts

Redhead, K.J. (2012) Development of personal finance as an academic discipline. PhD thesis. Coventry: Coventry University. p. 27-28

Threshold concepts are ideas that transform a person’s thinking (Meyer and Land, 2005). When a
threshold concept is successfully communicated to someone that person acquires a new way of
understanding, interpreting, or viewing something. Threshold concepts are transformative, in that they
occasion significant shifts in the perception of a subject. They are also likely to be integrative, in that
they expose relationships between subjects. The process of developing an understanding of a threshold
concept gives the person a new way of interpreting events and situations. Arguably education should
aim to communicate threshold concepts.
Every discipline has its own threshold concepts that are essential for students to understand.
Understanding the threshold concepts is necessary if someone wants to be able to think like a
professional. There is a distinction between learning engineering and thinking like an engineer, or
learning economics and thinking like an economist. When a person is able to think like an engineer or
think like an economist then that person is capable of being an engineer or an economist. A student
first learns about personal financial advice, then develops the ability to think financially, and then can
become an effective personal financial adviser. Threshold concepts are more than just learning; they
transform a person’s way of thinking and significantly change the person. It is not necessarily easy to
identify the threshold concepts of a discipline. The identification of threshold concepts may require the
assessment of a consensus opinion, for example by means of questionnaire-based surveys as used by
Shea and West (1996) in relation to topical areas in industrial engineering. Since personal finance is
not yet widely taught (beyond professional training programmes) such a consensus is not yet available.
People can be resistant to changing the way they think, and can therefore be resistant to threshold
concepts. Threshold concepts change the way a person looks at matters, and thinks about those matters.
This can be disconcerting, particularly if it leads to the person questioning previous practice or is
inconsistent with strongly held beliefs. Confirmation bias causes people to be unwilling to accept new
ideas if those ideas conflict with existing opinions. For these reasons people who have earned a living
from financial advice for many years may be reluctant to engage with threshold concepts. Resistance to
a threshold concept may be stronger if the student has to work hard to understand it. For such reasons
threshold concepts are often regarded as troublesome knowledge. The articles in the Journal of
Financial Planning (2009) and the Journal of Financial Service Professionals (2010 and 2011) show
the relevance of behavioural concepts to personal financial advice and hence demonstrate that it is
worth the effort (and perhaps mental trauma) of acquiring some threshold concepts that arise from
psychology (such as the illusion of control and the confirmation bias). The articles in Money
Management (2010) showed the usefulness of threshold concepts from psychology, economics, and
mathematics for personal financial advisers. Personal Finance and Investments: A Behavioural
Finance Perspective (2008) showed the relevance of many threshold concepts to personal finance.