The Demand for Bad Policy when Voters Underappreciate Equilibrium Effects
نویسندگان
چکیده
We study whether and why voters may choose inefficient policies and institutions. We show that a majority of subjects in an experiment vote against policies that would help them overcome social dilemmas. This is due to their failure to fully anticipate the equilibrium effects of new policies. More precisely, subjects systematically underappreciate the extent to which policy changes affect other people’s behavior, and this results in increased demand for bad policy. In addition, we find that one-third of subjects do not appreciate how their own behavior will adapt to the new policy. The overall implication is that, in regimes where voter preferences affect policy selection, the underappreciation of equilibrium effects by voters could adversely affect the policies that get adopted. JEL codes: C9, D7.
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Online Appendix to The Demand for Bad Policy when Voters Underappreciate Equilibrium Effects
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