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The Economics Of Illusion

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Author Info

  • George A. Akerlof

Abstract

When individuals choose not only goods, but also how to process information, there is a bias: people tend to process information so that they feel good about themselves. This bias is particularly important in voting behavior, where agents have almost no individual effect on public choice outcomes, and therefore almost no incentive for unbiased use of information. Two examples are given. In one example, an adaptation of the classic overdepletion problem, the public chooses not to counteract externalities by appropriate tax policy. In the second example public policy follows the choices of experts, contrary to the interest of the public. Copyright 1989 Blackwell Publishers Ltd..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Economics & Politics.

Volume (Year): 1 (1989)
Issue (Month): 1 (03)
Pages: 1-15

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Handle: RePEc:bla:ecopol:v:1:y:1989:i:1:p:1-15

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985

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Cited by:
  1. Mikael Elinder, 2012. "Correcting mistakes: cognitive dissonance and political attitudes in Sweden and the United States," Public Choice, Springer, vol. 153(1), pages 235-249, October.
  2. Cesar Martinelli, 2002. "Would Rational Voters Acquire Costly Information?," Working Papers 0210, Centro de Investigacion Economica, ITAM.
  3. Oxoby, Robert J., 2003. "Attitudes and allocations: status, cognitive dissonance, and the manipulation of attitudes," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 365-385, November.
  4. Hillman, Arye L., 2010. "Expressive behavior in economics and politics," European Journal of Political Economy, Elsevier, vol. 26(4), pages 403-418, December.
  5. Wohlgemuth, Michael, 2004. "The Communicative Character of Capitalistic Competition: A Hayekian response to the Habermasian challenge," Freiburg Discussion Papers on Constitutional Economics 04/1, Walter Eucken Institut e.V..
  6. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
  7. Johansson-Stenman, Olof, 2008. "Mad cows, terrorism and junk food: Should public policy reflect perceived or objective risks?," Journal of Health Economics, Elsevier, vol. 27(2), pages 234-248, March.
  8. Caplan, Bryan, 2003. "The idea trap: the political economy of growth divergence," European Journal of Political Economy, Elsevier, vol. 19(2), pages 183-203, June.
  9. Michael Wohlgemuth, 2011. "Is there a Paradox of a Hayekian Paternalist?," Papers on Economics and Evolution 2011-22, Philipps University Marburg, Department of Geography.

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