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Cognitive Abilities and the Demand for Bad Policy

Author

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  • Nunnari, Salvatore

    (Bocconi University)

  • Proto, Eugenio

    (University of Glasgow)

  • Rustichini, Aldo

    (University of Minnesota)

Abstract

Rational choice theories assume that voters accurately assess the outcomes of policies. However, many important policies—such as regulating prices and introducing Pigouvian taxation—yield outcomes through indirect or equilibrium effects that may differ from their direct effects. Citizens may underestimate these effects, leading to a demand for bad policy, that is, opposition to reforms that would increase welfare or support for reforms that would decrease it. This appreciation might be linked to cognitive functions, raising important research questions: Do cognitive abilities influence how individuals form preferences regarding policies, especially untried reforms? If so, what is the underlying mechanism? We use a simple theoretical framework and an experiment to show that enhanced cognitive abilities may lead to better policy choices. Moreover, we emphasize the crucial role of beliefs about other citizens' cognitive abilities. These findings have important policy implications as they suggest that educational programs developing cognitive skills or interventions increasing trust in others' understanding could improve the quality of democratic decision-making in our societies.

Suggested Citation

  • Nunnari, Salvatore & Proto, Eugenio & Rustichini, Aldo, 2024. "Cognitive Abilities and the Demand for Bad Policy," IZA Discussion Papers 17112, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17112
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    More about this item

    Keywords

    voting; policy reform; political failure; cognition; experiment;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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