| Author(s): |
doc. PhDr. Martin Gregor Ph.D.,
|
| Type: |
IES Working Papers |
| Year: |
2007 |
| Number: |
21 |
| ISSN / ISBN: |
|
| Published in: |
IES Working Papers 2007/21 |
| Publishing place: |
Prague |
| Keywords: |
public choice, political economics, beliefs, learning |
| JEL codes: |
B53, D72, D8 |
| Suggested Citation: |
Gregor, M. (2007). “ Markets vs. Politics, Correcting Erroneous Beliefs Differently. ” IES Working Paper 21/2007. IES FSV. Charles University. |
| Grants: |
GAUK 319/2006/A-EK/FSV Rational Irationality: Adaptation on the Markets and in Collective Action
|
| Abstract: |
In the fields of social choice, public choice and political economics, the main difference between private and political choice is whether individual preferences are aggregated to make a decision. A much less studied difference is whether beliefs are aggregated to make a decision. In this paper, we argue that the need for aggregation creates different incentives for belief updates in private and political choice. We review contemporary theories of biased beliefs in politics: Bayesian misperceptions, behavioral anomalies, and rational irrationality. We examine assumptions and consequences of all the approaches vis-à-vis issues of common knowledge, stability, symmetry, and multiplicity of stable states. As a route for further analysis, we construct an evolutionary model including a coordination failure. Differences in learning dynamics make the political play of this baseline game Pareto-inferior to the private play. |
| Downloadable: |
WP 2007_21_Gregor
|
