Book Description

This dissertation explores various topics at the intersection of behavioral economics and political economy. It develops a theory of preference formation, investigates the effects of social media use, and studies the relationship between social image concerns and effective communication in the context of the political correctness debate. The first chapter, coauthored with B. Douglas Bernheim, Alejandro Martínez-Marquina, and David Zuckerman, develops a theory of preference formation. Specifically, we propose and develop a dynamic theory of endogenous preference formation in which people adopt worldviews that shape their judgments about their experiences. The framework highlights the role of mindset flexibility, a trait that determines the relative weights the decision maker places on her current and anticipated worldviews when evaluating future outcomes. The theory generates rich behavioral dynamics, thereby illuminating a wide range of applications and providing potential explanations for a variety of observed phenomena. The second chapter, coauthored Hunt Allcott, Sarah Eichmeyer, and Matthew Gentzkow, studies the effects of social media use. The rise of social media has provoked both optimism about potential societal benefits and concern about harms such as addiction, depression, and political polarization. In a randomized experiment, we find that deactivating Facebook for the four weeks before the 2018 US midterm election (i) reduced online activity, while increasing offline activities such as watching TV alone and socializing with family and friends; (ii) reduced both factual news knowledge and political polarization; (iii) increased subjective well-being; and (iv) caused a large persistent reduction in post-experiment Facebook use. Deactivation reduced post-experiment valuations of Facebook, suggesting that traditional metrics may overstate consumer surplus. The third chapter studies the relationship between social image concerns and effective communication in the context of the political correctness debate. Specifically, I study theoretically and experimentally whether social image concerns around topics related to political correctness on college campuses lead students to publicly state opinions that they do not privately hold, and whether such distortions diminish the informativeness of statements made in public. The theoretical framework underlying the experiment - a signaling model with lying costs - suggests that social image concerns may distort the sensitive socio-political attitudes that students report in public compared to the ones they hold in private, but that such distortions need not necessarily imply a loss of information. The results of the experiment show that: i) social image concerns drive a wedge between the sensitive socio-political attitudes that college students report in private and in public; ii) public utterances are less informative than private utterances according to a host of measures of informativeness suggested by the theoretical model; iii) information loss is exacerbated by the fact that the natural audience in the environment, namely other college students, are partially naive about the ways in which social image concerns distort their peers' public statements.