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Equilibrium Fictions: A Cognitive Approach to Societal Rigidity

Stiglitz, Joseph E.; Hoff, Karla

Recently, economic theorists have investigated the construction of ideologies (see, e.g., Edward L. Glaeser 2005 and Roland Bénabou and Jean Tirole 2006). They have modeled individuals as trading off the benefits of subscribing to a particular ideology or of suppressing certain kinds of information, against the costs that that entails. Recent discussions of macroeconomics have assigned a role to Keynesian "animal spirits"--emotions that influence confidence--giving almost unfettered scope to changes in beliefs.



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American Economic Review

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March 27, 2013
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