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Ideology

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  • Benabou, Roland

    ()
    (Princeton University)

Abstract

I develop a model of ideologies as collectively sustained (yet individually rational) distortions in beliefs concerning the proper scope of governments versus markets. In processing and interpreting signals of the efficacy of public and market provision of education, health insurance, pensions, etc., individuals optimally trade off the value of remaining hopeful about their future prospects (or their children’s) versus the costs of misinformed decisions. Because these future outcomes also depend on whether other citizens respond to unpleasant facts with realism or denial, endogenous social cognitions emerge. Thus, an equilibrium in which people acknowledge the limitations of interventionism coexists with one in which they remain obstinately blind to them, embracing a statist ideology and voting for an excessively large government. Conversely, an equilibrium associated with appropriate public responses to market failures coexists with one dominated by a laissez-faire ideology and blind faith in the invisible hand. With public-sector capital, this interplay of beliefs and institutions leads to history-dependent dynamics. The model also explains why societies find it desirable to set up constitutional protections for dissenting views, even when ex-post everyone would prefer to ignore unwelcome news.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3416.

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Length: 36 pages
Date of creation: Mar 2008
Date of revision:
Publication status: published in: Journal of the European Economic Association, 2008, 6 (2-3), 321-352
Handle: RePEc:iza:izadps:dp3416

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Keywords: institutions; wishful thinking; cognitive dissonance; laissez-faire; statism; ideology; political economy; psychology;

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References

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  1. Markus K. Brunnermeier & Jonathan A. Parker, 2004. "Optimal Expectations," NBER Working Papers 10707, National Bureau of Economic Research, Inc.
  2. Laurence Kranich & Matteo Cervellati & Joan Esteban, 2006. "The Social Contract with Endogenous Sentiments," Discussion Papers, University at Albany, SUNY, Department of Economics 06-06, University at Albany, SUNY, Department of Economics.
  3. Piketty, Thomas, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 551-84, August.
  4. Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(387), pages 666-84, September.
  5. Marcus Noland, 2003. "Religion, Culture, and Economic Performance," Working Paper Series, Peterson Institute for International Economics WP03-8, Peterson Institute for International Economics.
  6. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 307-19, June.
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Cited by:
  1. Janeba, Eckhard & Heinemann, Friedrich, 2011. "Viewing tax policy through party-colored glasses: What German politicians believe," MPRA Paper 33096, University Library of Munich, Germany.

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