Mindful Economics: The Production, Consumption, and Value of Beliefs

Abstract

In this paper, we provide a perspective into the main ideas and findings emerging from the growing literature on motivated beliefs and reasoning. This perspective emphasizes that beliefs often fulfill important psychological and functional needs of the individual. Economically relevant examples include confidence in ones' abilities, moral self-esteem, hope and anxiety reduction, social identity, political ideology, and religious faith. People thus hold certain beliefs in part because they attach value to them, as a result of some (usually implicit) tradeoff between accuracy and desirability. In a sense, we propose to treat beliefs as regular economic goods and assets--which people consume, invest in, reap returns from, and produce, using the informational inputs they receive or have access to. Such beliefs will be resistant to many forms of evidence, with individuals displaying non-Bayesian behaviors such as not wanting to know, wishful thinking, and reality denial.