Postal address: Leibniz Institute for Financial Research SAFE
60323 Frankfurt am Main, Germany
Subjective Models of the Macroeconomy: Evidence From Experts and Representative Samples | with Carlo Pizzinelli, Chris Roth, and Johannes Wohlfart | Review of Economic Studies, 2022, Volume 89, Issue 6, Pages 2958–2991
Short summary: We study people's subjective models of the macroeconomy and shed light on their attentional foundations. To do so, we measure beliefs about the effects of macroeconomic shocks on unemployment and inflation. Within samples of both 6,500 US households and 1,500 experts, beliefs are widely dispersed, even about the directional effects of shocks, and there are large differences in average beliefs between households and experts. Part of this disagreement arises from selective retrieval of different propagation channels of macroeconomic shocks.
Narratives about the Macroeconomy | with Ingar Haaland, Chris Roth, and Johannes Wohlfart | Revise & Resubmit, Review of Economic Studies
Short summary: We provide evidence on narratives about the macroeconomy—the stories people tell to explain macroeconomic phenomena—in the context of a historic surge in inflation. We measure narratives about the rise in inflation in open-ended survey responses and represent them as Directed Acyclic Graphs. Our approach allows us to characterize laypeople's economic narratives. In a series of experiments, we show that narratives about the past shape how people forecast the future and how they interpret new information.
Shallow Meritocracy | Revise & Resubmit, Review of Economic Studies
Winner of the Distinguished CESifo Affiliate Award in Behavioral Economics 2022
Coverage: Twitter thread
Short summary: Meritocracies aspire to reward hard work but promise not to judge individuals by the circumstances into which they were born. However, circumstances often shape the choice to work hard. I show that people's merit judgments are insensitive to this effect. They hold others responsible for their choices, even if these choices have been shaped by unequal circumstances. In an experiment, US participants judge how much money workers deserve for the effort they exert. Unequal circumstances disadvantage some workers and discourage them from working hard. Nonetheless, participants reward the effort of disadvantaged and advantaged workers identically, regardless of the circumstances under which choices are made.
Mental Models of the Stock Market | with Philipp Schirmer and Johannes Wohlfart
Short summary: Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models—their subjective understanding—of the stock market, drawing on surveys with the US general population, US retail investors, US financial professionals, and academic experts. Experts' reasoning aligns with standard asset pricing logic and a belief in efficient markets. In stark contrast, households and financial professionals employ a naive model that directly associates higher future earnings with higher future returns, neglecting the offsetting effect of endogenous price adjustments.
What's Worth Knowing? Economists' Opinions about Economics | with Armin Falk
Short summary: In global surveys with more than 10,000 economists, we study economists’ views about what is worth knowing. We document a coordination failure, i.e., a discrepancy between what economists consider to be worth knowing and the research they actually produce. Relative to the status quo, most economists believe that economics should become more policy-relevant, multidisciplinary, disruptive, and pursue more diverse research topics. However, economists strongly underestimate how many of their colleagues endorse these views.
Misperceived Social Norms and Willingness to Act Against Climate Change | with Teodora Boneva, Felix Chopra, and Armin Falk
IZA Award for Innovative Research on the Economics of Climate Change
Coverage: Ökonomenstimme (German), briq news room (German), ZEIT (German)
Superseding an earlier version with the title "Fighting Climate Change: The Role of Norms, Preferences, and Moral Values".
Short summary: We document the individual willingness to act against climate change and study its behavioral determinants in a large representative sample of US adults. We document systematic misperceptions of social norms. Respondents vastly underestimate the prevalence of climate-friendly behaviors and norms among their fellow citizens. Correcting these misperceptions in an experiment causally raises the individual willingness to act against climate change as well as individual support for climate policies.
Globally Representative Evidence on the Actual and Perceived Support for Climate Action | with Teodora Boneva, Felix Chopra, and Armin Falk | Revise & Resubmit (2nd round), Nature Climate Change
Short summary: Mitigating climate change necessitates global cooperation, yet global data on individuals' willingness to act remain scarce. In this study, we conducted a representative survey across 125 countries, interviewing nearly 130,000 individuals.