Alastair Langtry

Abstract

Keeping up with “The Joneses” matters. This paper examines a model of reference dependent choice where reference points are determined by social comparisons. An increase in the strength of social comparisons, even by only a few agents, increases consumption and decreases welfare for everyone. Strikingly, a higher marginal cost of consumption can increase welfare. In a labour market, social comparisons with co-workers create a big fish in a small pond effect, inducing incomplete labour market sorting. Further, it is the skilled workers with the weakest social networks who are induced to give up income to become the big fish. 

Abstract

When a government makes many different policy decisions, lobbying can be viewed as a contest between the government and many different special interest groups. The government fights lobbying by interest groups with its own political capital. In this world, we find that a government wants to `sell protection' -- give favourable treatment in exchange for contributions -- to certain interest groups. It does this in order to build its own `war chest' of political capital, which improves its position in fights with other interest groups. And it does so until it wins all remaining contests with certainty. This stands in contrast to existing models that often view lobbying as driven by information or agency problems. 

Abstract

This paper presents novel empirical evidence that politicians `gamble for re-election'. We show that in the context of a political leader selection, members of parliament are more likely to vote for a riskier candidate when facing tougher re-election races. Quantitatively, a 10 pp. decrease in the probability to be re-elected is associated with a 2.6 pp. increase in the likelihood to vote for the riskier candidate. These results are in line with a simple model of rational risk taking. To overcome challenges arising from secret ballots, we exploit leaked information on MPs’ individual decisions in a \textit{de facto} vote for the 2021 leadership election of Germany’s centre-right parties. We provide first evidence that gambling style behaviour -- which has been documented in many areas of economic decision-making -- is also important in politics. Gambling for re-election provides a new explanation for polarisation within a political party and opens up the possibility that parties choose bad leaders when good ones are available.

Abstract

This paper presents a new rationale for a self-interested economic elite voluntarily extending property rights. When agents make endogenous investment decisions, there is a commitment problem. Ex post, the elite face strong incentives to expropriate investments from the non-elite (who don’t have property rights), which dissuades investment. Extending property rights to new groups can resolve this problem, even for those not given property rights, by making public good provision more attractive to the elite. Unlike other models of franchise extensions, extending property rights in this paper does not involve the elite ceding control to others. Rather, it changes the incentives they face. Additionally, adding identity groups to the model shows that an elite faces stronger incentives to resolve the commitment problem when it is part of a majority identity. This suggests identity fragmentation may make it harder for a society to extend property rights.

Abstract

This paper adapts ideas from social identity theory to set out a new framework for modelling conspicuous consumption. Notably, this approach can explain two stylised facts about conspicuous consumption that initially seem at odds with one another, and to date have required different families of models to explain each: (1) people consume more visible goods when their neighbours’ incomes rise, but (2) consume less visible goods when incomes of those with the same race in a wider geographic area rise. The first fact is typically explained by ‘Keeping up with the Joneses’ models, and the second by signalling models. Our model also explains related features of conspicuous consumption: that the rich are more sensitive to others’ incomes than the poor, and that the effect of income inequality on consumption differs qualitatively across groups. Importantly, it explains this fourth stylised fact without falling back on differences in preferences across groups, as required in other models. In addition, our model delivers new testable predictions regarding the role of network structure and income inequality for conspicuous consumption. 

Abstract

Contact tracing and quarantine programs have been one of the leading Non-Pharmaceutical Interventions against COVID-19. Some governments have relied on mandatory programs, whereas others embrace a voluntary approach. However, there is limited evidence on the relative effectiveness of these different approaches. In an interactive online experiment conducted on 731 subjects representative of the adult US population in terms of sex and region of residence, we find there is a clear ranking. A fully mandatory program is better than an optional one, and an optional system is better than no intervention at all. The ranking is driven by reductions in infections, while economic activity stays unchanged. We also find that political conservatives have higher infections and levels of economic activity, and they are less likely to participate in the contact tracing program. 

Abstract

Governments have used social distancing to stem the spread of COVID-19, but lack evidence on the most effective policy to ensure compliance. We examine the effectiveness of fines and informational messages (nudges) in promoting social distancing in a web-based interactive experiment conducted during the pandemic on a near-representative sample of the US population. Fines promote distancing, but nudges only have a marginal impact. Individuals do more social distancing when they are aware they are a superspreader. Political ideology also has a causal impact -- progressives are more likely to practice distancing, and they are marginally more responsive to fines. 

Abstract

In recent years online social networks have become increasingly prominent in political campaigns and, concurrently, several countries have experienced shock election outcomes. This paper proposes a model that links these two phenomena. In our set-up, the process of learning from others on a network is influenced by confirmation bias, i.e. the tendency to ignore contrary evidence and interpret it as consistent with one's own belief. When agents pay enough attention to themselves, confirmation bias leads to slower learning in any symmetric network, and it increases polarization in society. We identify a subset of agents that become more/less influential with confirmation bias. The socially optimal network structure depends critically on the information available to the social planner. When she cannot observe agents' beliefs, the optimal network is symmetric, vertex-transitive and has no self-loops. We explore the implications of these results for electoral outcomes and media markets. Confirmation bias increases the likelihood of shock elections, and it pushes fringe media to take a more extreme ideology.