Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform

Gilles Saint-Paul

No 4468, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Much of the political economy analysis of reform focuses on the conflict of interest between groups that stand to gain or lose from the competing policy proposals. In reality, there is also a lot of disagreement about the working of the policy: in addition to conflicting interests, conflicting views play an important role. Those views are shaped in part by an educational bureaucracy. It is documented that the beliefs of that bureaucracy differ substantially from those of the broader constituency. I analyse a model where this effect originates in the self-selection of workers in the educational occupation, and is partly reinforced by the insulation of the educational profession from the real economy (an effect which had been discussed by Hayek). The bias makes it harder for the population to learn the true parameters of the economy if these are favourable to the market economy. Two parameters that govern this capacity to learn are social entropy and heritability. Social entropy defines how predictable one's occupation is as a function of one's beliefs. Heritability is the weight of the family's beliefs in the determination of the priors of a new generation. Both heritability and social entropy reduce the bias and makes it easier to learn that the market economy is "good", under the assumption that it is. Finally I argue that the capacity to learn from experience is itself affected by economic institutions. A society which does not trust markets is more likely to favour labour market rigidities that in turn reduces the exposure of individuals to the market economy, and thus their ability to learn from experience. This in turn reinforces the weight of the educational system in the formation of beliefs, thus validating the initial presumption against the market economy. This sustains an equilibrium where beliefs and institutions reinforce each other in slowing or preventing people from learning the correct underlying parameters.

Keywords: ideology; beliefs; political economy; labor market reform; occupational choice; education; employment protection; civil service; market economy; unemployment (search for similar items in EconPapers)
JEL-codes: E02 E24 I21 I28 J22 J23 J24 J45 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2009-10
New Economics Papers: this item is included in nep-evo, nep-lab, nep-mac and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Economic Journal, 2010, 120 (544), 325 - 353

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Related works:
Journal Article: Endogenous Indoctrination: Occupational Choices, the Evolution of Beliefs and the Political Economy of Reforms (2010)
Working Paper: Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform (2009)
Working Paper: Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform (2009)
Working Paper: Endogenous Indoctrination: Occupational Choice, the Evolution of Beliefs, and the Political Economy of Reform (2009)
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