Ideology Paper

Saw this interesting sounding article in my mailbox just now. Entitle "Ideology," and written by Roland Bénabou at Princeton. Abstract reads:

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.

I'm skimming through it, and it's pretty interesting. I doubt I'll read the whole thing but this quote was interesting, too.

Caplan (2007) presents extensive evidence of “anti-market bias”: distrust of the profit motive, unfairness of price allocations, perception of competition as a rigged, negative-sum game, desire to protect existing jobs against technological change and especially foreign competition, etc. His explanation is that voters derive consumption value from beliefs, and since holding incorrect ones is of little personal consequence because each vote has a negligible chance of mattering, they freely indulge in a number of exogenous “feel-good” biases. ... First, why (or when) should anti-market beliefs and blind faith in public bureaucracies make voters “feel better” than anti-state beliefs and blind faith in the invisible hand?

This was also kind of funny, but interesting.

To analyze these issues, one needs to explicitly model both the economic and the psychological costs and benefits of different worldviews, and in particular how they depend endogenously on the current or anticipated politico-economic environment.