This research will address important problems in political economy and public economics from a new perspective that aims to incorporate into policy analyses a better understanding of people's actual motives, cognitive processes and behavior. In particular, a central emphasis will be placed on the motivated, endogenous nature of individuals' self-views (identities) and world views (ideologies).
A first line of research will center on people's beliefs concerning the primacy of self-reliance versus societal forces as determinants of individual wealth or poverty, and the corresponding desirability of laissezfaire versus welfare-state policies. A joint theory of ideology and policy will be developed to account for the striking attitudinal di.erences observed across countries, and shed light on the related question of when expectations of high mobility (e.g., the American Dream) will dampen the poor's demand for redistribution. Notably, both experiments and ethnographic studies document individuals' struggle with the cognitive dissonance often required to maintain (and pass on to one's children) the view that hard work and good deeds will ultimately bring a better life.
The PI will build a model using tools from economic theory. The model will attempt to explain why people feel such a need to believe in a "just world"; why this need, and therefore the prevalence of the belief, may vary considerably across countries, and exhibit history-dependence; and how this affects redistributive policies, societies' response to technical change, and the stigma borne by the poor.
The second part of the project will deal with the interaction between incentives and social or selfperceptions in determining contributions to public goods. Indeed, a growing body of evidence shows that people are often less likely to behave in a prosocial manner when faced with (moderate) rewards or fines than when there is no explicit incentive. At the same time, when given the opportunity to remain ignorant of how their actions a.ect others, people often choose not to know, and revert to selfish choices. These paradoxes will be addressed with a theory of prosocial behavior that combines genuinely altruistic preferences with social or self-signaling motives. Incentives a.ect the honor and stigma from alternative choices, potentially causing a "crowding out" of voluntary participation. The model will also identify factors conducive to multiple norms of behavior, show how people can suffer from an increase in their bargaining power, and explain how disclosing one's good deeds may backfire. Finally, competition among sponsors of public-goods contributions (charitable or religious organizations, NGOs') will be analyzed. The third part of the project will develop a cognitive theory of why (and how) people invest themselves in a personal, professional, social or cultural identity. The starting point will be the recognition that individuals often do not know their own preferences and motives very well, and tend instead to infer them from their own actions. The model will first explain the phenomenon of escalating commitments and excessive specialization (e.g., work v.s. family). It will also allow the study of identity conflicts, media feedback and group stereotypes. Another important application will focus on resistance to economic reforms, arising from the fact that people may prefer forms of redistribution that are ineffcient (farm price supports or industry protection rather than transfers, buyouts and retraining) but allow them to maintain valuable self-images. Redistributive mechanisms that take dignity concerns into account without inducing excessive distortions will also be investigated.
The research will bring to bear on some classical questions in public economics and political economy a number of important findings from both psychology and sociology. It will also take up several novel questions related to the formation and persistence of people's identities and ideologies. Conversely, the tools of economic formalization will provide a clearer understanding, more explicit predictions, new testable implications and a welfare analysis of these often loosely defined concepts, thus generating cross-disciplinary fertilization and challenges in the reverse direction as well.
The benefits of the proposed research to society will include a better understanding of voter attitudes towards poverty and redistribution, of the efficacy of public and private incentives in promoting socially desirable behaviors, of the notions of identity or dignity and the ways in which they may conflict with economic or social reforms.
