We will use this space each week in the news blast for Justin to share new ideas he thinks may be of interest for our behavioral & experimental community. If you ever have ideas for topics, please share your ideas with
This Week's BRITE Idea:
For this week's BRITE ideas we want to point you to a very interesting new
by Ben Enke from Harvard and Florian Zimmermann at Zurich, who Justin thinks are two of the brightest young minds in behavioral economics. Their paper is called “Correlation Neglect in Belief Formation” and uses a set of laboratory experiments to test the ways in which people neglect the correlation in the signals they get.
The motivation is to think about things like social media where we might here the same “stories” or get the same “signals” from many people in my network, but they are all drawing on the same underlying piece of news. Here is how they describe their contributions:
“ First, we provide clean evidence that in a relatively simple and completely transparent setting people neglect correlations in information sources when forming beliefs, albeit with a strong heterogeneity at the individual level. As a consequence, just like recent models of boundedly rational social learning predict, people’s beliefs are excessively sensitive to well-connected information sources and hence follow an overshooting pattern. Second, we develop a series of treatment variations to uncover that people do in principle possess the mathematical and computational skills that are necessary to process correlated information in our setting. However, when the informational environment is sufficiently complex, many people exhibit conceptual problems in identifying and thinking through the correlation in the first place. As a consequence, exogenously shifting subjects’ focus towards the correlation and the underlying independent signals has large effects on beliefs.”
Justin thinks, in particular, that this is an interesting case where forms of “de-biasing” seem to potentially be fairly powerful.