Cognitive Abilities and the Demand for Bad Policy
(with Salvatore Nunnari and Aldo Rustichini)
Rational choice theories posit that citizens accurately evaluate policy options. However, many policies—such as price controls or Pigouvian taxes—produce equilibrium effects that citizens may underestimate, potentially leading to support for detrimental policies or opposition to beneficial ones. This under-appreciation may be linked to citizens’ cognitive abilities, raising fundamental research questions: Do cognitive abilities influence citizens’ preferences over policies? If so, what mechanisms underlie this influence? We employ a theoretical framework and conduct a decision-making experiment involving a UK-representative sample to demonstrate that enhanced cognitive abilities can lead to improved policy preferences. We also uncover the crucial role of beliefs about the cognitive abilities of other citizens: even highly cognitively capable individuals may oppose beneficial reforms if they doubt others’ capacity to understand these policies’ implications and adapt their behavior accordingly. We assess the external validity of these findings through a survey experiment measuring support for important climate mitigation policies and correlational evidence from the UK Household Longitudinal Study. We discuss the policy implications of these findings.
