Endogenous preference formation on macroeconomic issues: the role of individuality and social conformity
Macroeconomic events often require individuals and policy-makers to make decisions that they are not accustomed to making. For example, a sovereign debt crisis makes it necessary to either default on government debt, increase taxes, cut public spending or to impose a mixture of these measures. I argue that decisions on such matters are not derived from deep preferences; they require reflections and judgement under uncertainty. Past experiences and the interaction with other individuals are likely to influence the salience of preferences in the situations of decision making. Using a simple model, I illustrate how the salience of preferences changes with different degrees of individuality and conformity. Individuality is associated with the importance of private habits, while conformity is related to the perceived dissonance between initial intuitions and social opinions. The results obtained from simple simulation exercises stress that a high degree of conformity or a low degree of individuality may lead to overreactions when social opinion makers err for a short period of time. At the same time, a low degree of conformity or a high degree of individuality or leads to delayed adjustments to new circumstances. Copyright Springer-Verlag Berlin Heidelberg 2014
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 13 (2014)
Issue (Month): 1 (June)
|Contact details of provider:|| Web page: http://www.springer.com|
Web page: http://www.fondazionerosselli.it
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/journal/11299|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Karla Hoff & Joseph E. Stiglitz, 2010.
"Equilibrium Fictions: A Cognitive Approach to Societal Rigidity,"
American Economic Review,
American Economic Association, vol. 100(2), pages 141-146, May.
- Hoff, Karla & Stiglitz, Joseph E., 2010. "Equilibrium fictions : a cognitive approach to societal rigidity," Policy Research Working Paper Series 5219, The World Bank.
- Karla Hoff & Joseph E. Stiglitz, 2010. "Equilibrium Fictions: A Cognitive Approach to Societal Rigidity," NBER Working Papers 15776, National Bureau of Economic Research, Inc.
- Rutherford,Malcolm, 1996. "Institutions in Economics," Cambridge Books, Cambridge University Press, number 9780521574471.
- Rutherford,Malcolm, 1994. "Institutions in Economics," Cambridge Books, Cambridge University Press, number 9780521451895, February.
- Rabin, Matthew, 1994. "Cognitive dissonance and social change," Journal of Economic Behavior & Organization, Elsevier, vol. 23(2), pages 177-194, March.
- Matthew Rabin., 1991. "Cognitive Dissonance and Social Change," Economics Working Papers 91-180, University of California at Berkeley.
- Rabin, Mathew, 1991. "Cognitive Dissonance and Social Change," Department of Economics, Working Paper Series qt37b169jt, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- D. Rodrik., 2015. "When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
- Dani Rodrik, 2014. "When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 189-208, Winter.
- Rodrik, Dani, 2013. "When Ideas Trump Interests: Preferences, World Views, and Policy Innovations," CEPR Discussion Papers 9734, C.E.P.R. Discussion Papers.
- Dani Rodrik, 2013. "When Ideas Trump Interests: Preferences, World Views, and Policy Innovations," NBER Working Papers 19631, National Bureau of Economic Research, Inc.
- Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
- Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
- R. M. Harstad & R. Selten., 2014. "Bounded-Rationality Models: Tasks to Become Intellectually Competitive," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
- Ronald M. Harstad & Reinhard Selten, 2013. "Bounded-Rationality Models: Tasks to Become Intellectually Competitive," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 496-511, June.
- Morten Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2006. "Deep Habits," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 195-218.
- Ravn, Morten O & Schmitt-Grohé, Stephanie & Uribe, Martín, 2004. "Deep Habits," CEPR Discussion Papers 4269, C.E.P.R. Discussion Papers.
- Morten Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2004. "Deep Habits," NBER Working Papers 10261, National Bureau of Economic Research, Inc.
- Morten O. Ravn & Stephanie Schmitt-Grohe, 2004. "Deep Habits," 2004 Meeting Papers 208, Society for Economic Dynamics.
- Matthew Rabin, 2013. "Incorporating Limited Rationality into Economics," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 528-543, June.
- Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
- Hodgson, Geoffrey M., 2004. "Reclaiming habit for institutional economics," Journal of Economic Psychology, Elsevier, vol. 25(5), pages 651-660, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:spr:minsoc:v:13:y:2014:i:1:p:49-58. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.