Type of Publication: | Journal article |
Author: | Schuett, Florian; Wagner, Alexander K. |
Year of publication: | 2011 |
Published in: | Journal of Public Economics ; 95 (2011), 11-12. - pp. 1621-1634. - Elsevier. - ISSN 0047-2727. - eISSN 1879-2316 |
DOI (citable link): | https://dx.doi.org/10.1016/j.jpubeco.2011.04.001 |
Summary: |
Hindsight bias is a cognitive deficiency that leads people to overestimate ex post how predictable an event was. In this paper we develop a political-agency model in which voters are hindsight-biased and politicians differ in ability, defined as information concerning the optimal policy. When public information is not too accurate, low-ability politicians sometimes gamble on suboptimal policies: in an attempt to mimic the high-ability type, who has superior private information, they go against public information and choose a policy whose expected payoff to society is negative. We model hindsight bias as a memory imperfection that prevents voters from accessing their ex ante information about the state of the world. We show that the bias can act as a discipline device that reduces policy gambles and can therefore be welfare enhancing. Although it is well known that restrictions on information acquisition can be beneficial for a principal, our contribution is to show that a psychological bias can have such an effect.
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Subject (DDC): | 330 Economics |
Keywords: | Political agency; Policy gambles; Hindsight bias; Memory distortions |
Bibliography of Konstanz: | Yes |
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SCHUETT, Florian, Alexander K. WAGNER, 2011. Hindsight-Biased Evaluation of Political Decision Makers. In: Journal of Public Economics. Elsevier. 95(11-12), pp. 1621-1634. ISSN 0047-2727. eISSN 1879-2316. Available under: doi: 10.1016/j.jpubeco.2011.04.001
@article{Schuett2011Hinds-1793, title={Hindsight-Biased Evaluation of Political Decision Makers}, year={2011}, doi={10.1016/j.jpubeco.2011.04.001}, number={11-12}, volume={95}, issn={0047-2727}, journal={Journal of Public Economics}, pages={1621--1634}, author={Schuett, Florian and Wagner, Alexander K.} }
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