Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform
AbstractMuch of the political economy analysis of reform focuses on the conflict of interest between groups that stand to gain or lose from the competing policy proposals. In reality, there is also a lot of disagreement about the working of the policy: in addition to conflicting interests, conflicting views play an important role. Those views are shaped in part by an educational bureaucracy. It is documented that the beliefs of that bureaucracy differ substantially from those of the broader constituency. I analyse a model where this effect originates in the self-selection of workers in the educational occupation, and is partly reinforced by the insulation of the educational profession from the real economy (an effect which had been discussed by Hayek). The bias makes it harder for the population to learn the true parameters of the economy if these are favourable to the market economy. Two parameters that govern this capacity to learn are social entropy and heritability. Social entropy defines how predictable one's occupation is as a function of one's beliefs. Heritability is the weight of the family's beliefs in the determination of the priors of a new generation. Both heritability and social entropy reduce the bias and makes it easier to learn that the market economy is "good", under the assumption that it is. Finally I argue that the capacity to learn from experience is itself affected by economic institutions. A society which does not trust markets is more likely to favour labour market rigidities that in turn reduces the exposure of individuals to the market economy, and thus their ability to learn from experience. This in turn reinforces the weight of the educational system in the formation of beliefs, thus validating the initial presumption against the market economy. This sustains an equilibrium where beliefs and institutions reinforce each other in slowing or preventing people from learning the correct underlying parameters.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4468.
Length: 55 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Economic Journal, 2010, 120 (544), 325 - 353
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Other versions of this item:
- Gilles Saint-Paul, 2010. "Endogenous Indoctrination: Occupational Choices, the Evolution of Beliefs and the Political Economy of Reforms," Economic Journal, Royal Economic Society, vol. 120(544), pages 325-353, 05.
- Saint-Paul, Gilles, 2009. "Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform," IDEI Working Papers 556, Institut d'Économie Industrielle (IDEI), Toulouse.
- Saint-Paul, Gilles, 2009. "Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform," CEPR Discussion Papers 7335, C.E.P.R. Discussion Papers.
- Saint-Paul, Gilles, 2009. "Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform," TSE Working Papers 09-033, Toulouse School of Economics (TSE).
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-EVO-2009-10-24 (Evolutionary Economics)
- NEP-LAB-2009-10-24 (Labour Economics)
- NEP-MAC-2009-10-24 (Macroeconomics)
- NEP-POL-2009-10-24 (Positive Political Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Policy inertia through educational elites
by Economic Logician in Economic Logic on 2009-11-24 15:43:00
- The (changing?) role of the intellectuals
by Pedro S. Martins in The Portuguese Economy on 2011-04-25 22:28:00
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