Transcript Equilibrium Fictions: A cognitive approach to

THE ROLE OF IDEOLOGY IN
SOCIAL AND ECONOMIC
CHANGE
KARLA HOFF AND JOSEPH E. STIGLITZ
WORLD BANK, MARCH 22, 2010
Talk based on “Karla Hoff and Joseph E. Stiglitz, Equilibrium Fictions: A Cognitive Approach to Societal Rigidity,”
American Economic Review, Papers & Proceedings, May 2010.
The dominant developmental model
in economics



Institutions are the “rules of the game”
Individuals take into account all relevant information
and use it well
Generally, ideology has just a “walk-on role”

See Acemoglu-Johnson-Robinson (2005)
Not all economists subscribe to this
extreme view …

Problems posed by the transition of one belief
system to another “are at the core of the problems
of economic development. There is nothing
automatic about such a transition being successful.”


North 2005, p. 44
See also Loury 2002
HOW does ideology matter?
& WHERE does ideology come from?
Outline of presentation
 Biases
in cognition
 Confirmatory
bias on perception
 Pre-confirmatory bias
 Views
in sociology and anthropology
 Belief
 Our
systems shape perception
view:
 Belief
systems shape perception but need themselves to be
explained
 A case study of racial ideology
 Elements
in a theory of “equilibrium ideology”
Problems with the economists’
assumptions

Beliefs shape perceptions
Very blurry photo

Polly –please insert the most blurry picture. It
should be so blurry that no one could recognize
the object in the photo
Medium blur

Insert the 2nd most blurry picture. Again, it
should be absolutely impossible to identify the
objects in the photo.
Light blur

Now show a photo where it is just barely
possible to identify the objects
Final photo

Finally show the picture that is somewhat clear—
but still ambiguous
Confirmatory bias
Classic experiment – Bruner-Potter (1964)
Participants were asked to identify blurred slides
The range of blur to which people were exposed varied
across 3 groups


Very blurred…………………………..final
Medium blur…………….….final
Light blur……….final
Percentage of pictures recognized
60
40
20
0
Very blurred
Medium blur
Light blur
Initial condition at which the objects were seen



Correct identification least likely if the starting slide
was very blurred
Why?
Initial wrong hypotheses developed at the
“very blurred” stage get in the way of correctly
interpreting the data

Economists have shown that if the confirmatory bias
is sufficiently severe, or the signals are sufficiently
weak, then an individual may come to believe with
near certainty that the incorrect hypothesis is true
even after an infinite number of signals


Rabin and Schrag 1999
This is interesting here because many of our presuppositions come from the society we live in. This
has implications for societal rigidity and change.
Original
2nd problem with economists’ view-“Pre-confirmatory” bias



The information that agents collect is structured.
Category systems are collectively held –so there
are supra-individual aspects of cognition
These category systems shape
perceptions, memory & behavior

I’ll give an economic example later--
2nd problem with economists’ view-“Pre-confirmatory” bias



The information that agents collect is structured.
Category systems are collectively held –so there
are supra-individual aspects of cognition
These category systems shape
perceptions, memory & behavior

I’ll give an economic example later--
A view from sociology &
anthropology

Institutions exist at two levels—rules of the game
and also symbolic systems


DiMaggio 1991
Institutions shape how we think….

Douglas 1986
Our view


The sociologists and anthropologists are right on the
need to incorporate belief systems into our models
of development
But still we have no general theory of how
ideologies change
Elements in a theory of an
equilibrium ideology



Individuals’ beliefs
Aggregation of those beliefs
Intrinsic values (“unquestioned truths”)

The process is idiosyncratic, so
 We will focus on an example—race—

& a paradox—the role of beliefs about equality of
men in the creation of racial ideology
Political and economic factors +
intrinsic values
Categorization and assignment of
meaning
• 2 examples
•Race in Virginia
• Race in British India
Ex. 1 The construction of race to
justify slavery

In Virginia, there was initially no coincidence
between skin color and labor status, and no general
perception of merit based on color.
In the 17th century,
“a substantial number of Virginia’s Negroes were
free or became free. And all of them, whether
servant, slave, or free, enjoyed most of the same
rights and duties as other Virginians. … They could
sue and be sued in court. They did penance in the
parish church for having illegitimate children.”
--Morgan,1972
Labor unrest in 17th c. Virgina



In Bacon’s Rebellion of 1676, Virginia’s “Poore
Endebted Discontented and Armed” turned against
the elite in a plundering expedition that spread
across the entire state
The fear of unrest contributed to the decline in the
reliance on indentured servants and to the
abridgement of the liberties of Africans.
“To keep as slaves black men who arrived in that
condition was possible and apparently regarded as
plain common sense” --Morgan 1972

“It is impossible for us to suppose that these beings
should be men; because if we suppose them to be
men, one would begin to believe that we ourselves
were not Christians”


--Montesquieu
Two fictions emerged
• The biological inequality of human beings with
black and white skin.
• Only two groups—a continuum was never
recognized
Ex 2 British imperial narrative in
India


In the 1700’s, the East India Company “had become
a rogue state: waging war …and collecting revenue
over Indian territory” that produced massive private
fortunes and contributed to famine in Bengal
In the trial of the governor of India, Edmund Burke
declared, “I impeach him in the name of the English
Constitution, which he has violated and broken,--I
impeach him in the name of Indian Millions, whom
he has sacrificed to injustice.”


But over the nine years of the trial, the idea that
British law applied to agents of Britain in India was
salvaged not by finding Hastings guilty (he was
acquitted) but instead by inventing a new
interpretation of India
What emerged was a “race theory that cast Britons
and Indians in a relationship of absolute difference”

Dirks, 2001
Slavery in Antiquity and in Russia

“Right, as the world goes, is only in question
between equals in power”

Thucydides 431 BC

There was slavery, but no race theory; &

Slaves often occupied high status positions
Political and economic inequality
+
intrinsic values
Categorization and signification
Entrenchment of
invented social identitiesmanc
differences
Entrenchment of invented social
identities
Histories were “made up” or suppressed to give content to the “natural” differences
between groups
Psychological distancing was impossible because deviations from the etiquette of interracial relations could lead to harsh punishment
In Brazil, a former slave could lose his freedom for violations of etiquette
Cultural expressions are regulated –dress, jewelry, parades…
“’Our mothers began telling us about being black from the day we were born.”
--Evers (cited in Ritterhouse 2006)
Caste is an example of an entrenched
identity in village North India



No physical markings distinguish castes
With very limited mobility for men in North India,
everyone in a village knows the caste of everyone
else
Lowest castes were traditionally treated as
“Untouchables” & denied opportunities for
education or non-menial work
Game Board with Frame
29
March 2004: Same setting as in Maze
Experiment
30
Jeeps for transporting participants in
session from 6 different villages
31
The power of a social construct:
An experiment in India
No caste gap when students are anonymous;
7
Average number of mazes solved
6
5
4
High caste
Low caste
3
2
1
0
Anonymous
Caste publicly
revealed
Source: Hoff and Pandey (2006)
The power of a social construct: an
experiment in India
Significant caste gap when individuals’ caste is revealed.
7
Average number of mazes solved
6
5
4
High caste
Low caste
3
2
1
0
Anonymous
Caste publicly
revealed
Source: Hoff and Pandey (2006)
Confirmatory biases can lead to
persistence of racial differences after
legal barriers are removed


Two “races”- reds and greens
Technology- Individuals can either fail or succeed at
a task, & self-confidence enhances success
probability
The technology
probability of success
1
0
1
confidence
The rational expectations equilibrium
probability of success
1
45°
0
1
proportion of events that
are recorded as success
Animal spirits:
any belief is possible for a while, but if
perception is unbiased, incorrect views can’t be maintained
probability of success
1
Spontaneous optimism
Spontaneous
pessimism
45°
0
60%
1
confidence
A human bias—
forgetting some of one’s failures

Most people remember their successes better than
their failures. They “forget” or rationalize some of
the failures
 E.g.
Far more than 50% of automobile drivers,
magistrate judges, married couples, etc. rank themselves as
above average
We formalize the idea of race as leading the “reds”
to be LESS able than the “greens” to suppress
experiences of failure
probability of success
1
High
suppression
of failure
45°
0
Low
suppression
of failure
1
Proportion of events that
are recorded as success
An “equilibrium fiction”
• Beliefs –
probability of success
1
90% success
• Actual success
rate is 75%
75%
• But beliefs are
consistent with
perceptions of
actual outcomes
(90%)
0
60%
75%
90%
Proportion of
events that
are recorded as
success

In a stable equilibrium, the belief generates a level
of performance that is consistent with the perception
of that performance
probability of success

The result is that a social
construct – race – by
influencing perceptions
is self-fulfilling
45°
0
Proportion of events that
are recorded as success
Summary

What is race?

--An ideology that arose from oppressive formal
institutions that violated beliefs about sovereignty and
power that were coming to be taken for granted


Fields, 1982
Why, in general, does ideology matter?
 It
affects perceptions, behavior, and policies
 It is not determined only by current interests- so
it has much more than a “walk-on role”
The dominant model in economics
Political and
economic rules
Outcomes
“rational
expectations”
Distribution of
resources
Our view
Political and
economic rules
Outcomes
Distribution of
resources
“Equilibrium
Ideologies”
Implications for development policy

The rules of the game are just the tip of the iceberg of
a functioning institution. Functioning institutions also
have associated with them a story, a belief system—
Cognitive sources of resistance to change

Access to information, changes in the distribution of
wealth, & new economic opportunities matter not only
directly but because they can
 Undermine
oppressive myths that are hurtful to individuals &
 Change incentives over the “motivated beliefs” that individuals
may choose to adopt—

e.g., racial, caste, & other ideologies