Not all information resonates
In this paper, Malmendier and Veldkamp argue that information resonates with recipients only when they identify with the person who communicates it. With information technology making learning more accessible it might be better if economic models would shift their emphasis from “access to information,” or “limited attention” to how different recipients value differently the same information depending on who conveys it.
As a result, people with heterogeneous characteristics display heterogeneity in beliefs and choices that follow socio-economic, racial, ethnic, and political boundaries. Such inequality is difficult to remedy with traditional information campaigns and redistributive policies or with traditional information provision. While other barriers, such as discrimination surely exist, one important barrier that may keep the poor from escaping poverty is the social barrier to information transmission.
By adopting the lens of information resonance, instead of information access, the effectiveness of a broad array of economic and social policies could be enhanced.
Information Resonance
Authors: Ulrike Malmendier, Laura Veldkamp
From: Columbia University, UC Berkeley
Mental models and expectation formation
In this paper Beutel and Weber develop an experiment to understand why individuals form expectations in a particular way. In order to do that, they break down the process of expectation formation into an information acquisition stage and an information processing stage. Their analysis is based on a representative survey on the DAX performance of approximately 4,000 German households participating in the Deutsche Bundesbank Survey on Consumer Expectations. They find that there are distinct types of investors with heterogeneous mental models of the stock market:
- At the acquisition stage, large heterogeneity exists in the ranking of information, how costly it is to obtain this information, and consequently, how well informed individuals are about stock market related information;
- At the information processing stage, individuals differ in how they revise their expectations upon receiving a given piece of news, for example, others revise their expectations only after receiving information on earnings growth, others only when they receive information on the price-earnings ratio;
- It is unclear what shapes individuals’ mental models.
Beliefs and Portfolios: Causal Evidence
Authors: Johannes Beutel, Michael Weber
From: Deutsche Bundesbank, University of Chicago
