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.
|Date of creation:||Mar 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Matteo Cervellati & Joan Esteban & Laurence Kranich, 2007.
"The Social Contract with Endogenous Sentiments,"
311, Barcelona Graduate School of Economics.
- Matteo Cervellati & Joan Esteban & Laurence Kranich, 2007. "The Social Contract with Endogenous Sentiments," UFAE and IAE Working Papers 702.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Joan Esteban & Laurence Kranich, 2003. "The Social Contracts with Endogenous Sentiments," Working Papers 71, Barcelona Graduate School of Economics.
- Laurence Kranich & Matteo Cervellati & Joan Esteban, 2006. "The Social Contract with Endogenous Sentiments," Discussion Papers 06-06, University at Albany, SUNY, Department of Economics.
- Cervellati, Matteo & Esteban, Joan & Kranich, Laurence, 2006. "The Social Contract with Endogenous Sentiments," IZA Discussion Papers 2312, Institute for the Study of Labor (IZA).
- Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, vol. 97(387), pages 666-84, September.
- Jonathan A. Parker & Markus K. Brunnermeier, 2004.
Econometric Society 2004 North American Winter Meetings
426, Econometric Society.
- Brunnermeier, Markus K & Parker, Jonathan A, 2004. "Optimal Expectation," CEPR Discussion Papers 4656, C.E.P.R. Discussion Papers.
- Markus K. Brunnermeier & Jonathan A. Parker, 2002. "Optimal Expectations," Working Papers 146, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- Jonathan Parker & Markus K Brunnermeier, 2002. "Optimal Expectations," FMG Discussion Papers dp434, Financial Markets Group.
- Markus K. Brunnermeier & Jonathan A. Parker, 2004. "Optimal Expectations," NBER Working Papers 10707, National Bureau of Economic Research, Inc.
- Markus K. Brunnermeier & Jonathan A. Parker, 2002. "Optimal expectations," LSE Research Online Documents on Economics 24954, London School of Economics and Political Science, LSE Library.
- Piketty, Thomas, 1995.
"Social Mobility and Redistributive Politics,"
The Quarterly Journal of Economics,
MIT Press, vol. 110(3), pages 551-84, August.
- Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
- Marcus Noland, 2003. "Religion, Culture, and Economic Performance," Working Paper Series WP03-8, Peterson Institute for International Economics.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6754. 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: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.