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The Polarization of Reality NBER WORKING PAPER SERIES THE POLARIZATION OF REALITY Alberto F. Alesina Armando Miano Stefanie Stantcheva Working Paper 26675 http://www.nber.org/papers/w26675 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 January 2020 The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2020 by Alberto F. Alesina, Armando Miano, and Stefanie Stantcheva. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. The Polarization of Reality Alberto F. Alesina, Armando Miano, and Stefanie Stantcheva NBER Working Paper No. 26675 January 2020 JEL No. D71,D72,H41,J15,P16,P35 ABSTRACT Americans are polarized not only in their views on policy issues and attitudes towards government and society, but also in their perceptions of the same factual reality. We conceptualize how to think about the “polarization of reality” and review recent papers that show that Republicans and Democrats view the same reality through a different lens. Perhaps, as a result, they hold different views about policies and what should be done to address economic and social issues. We also show that providing information leads to different reassessments of reality and different responses along the policy support margin, depending on one's political leaning. Alberto F. Alesina Stefanie Stantcheva Department of Economics Department of Economics Harvard University Littauer Center 232 Littauer Center 210 Harvard University Cambridge, MA 02138 Cambridge, MA 02138 and IGIER and NBER and also NBER [email protected] [email protected] Armando Miano Department of Economics Harvard University Littauer Center Cambridge, MA 02138 [email protected] The Polarization of Reality By Alberto Alesina, Armando Miano, and Stefanie Stantcheva∗ Evidence is growing that Americans are Earlier Literature: Some differences polarized not only in their views on policy in the perceptions between Republican issues and attitudes towards government and Democrat voters have been illustrated and society, but also in their perceptions of in the political science literature. Bar- the same factual reality. In this paper, we tels (2002) shows that party identifica- conceptualize how to think about the polar- tion shapes perception of economic indica- ization of reality and review recent papers tors that can be seen as the government's that show that Republicans and Democrats \performance indicators" (e.g., unemploy- (as well as Trump and non-Trump voters ment or inflation), with Republicans being since 2016) view the same reality through more optimistic than Democrats on eco- a different lens. Perhaps as a result, they nomic variables during the Reagan presi- hold different views about policies and what dency.1 Similar results about the impor- should be done to address different eco- tance of partisan assessment of the govern- nomic and social issues. ment's performance in shaping perceptions The direction of causality is unclear: On of economic indicators is found in Conover, the one hand, individuals could select into Feldman and Knight (1986) and Conover, political affiliation based on their percep- Feldman and Knight (1987). More recently, tions of reality. On the other hand, polit- Jerit and Barabas (2012) show that people ical affiliation affects the information one perceive the same reality in a way consistent receives, the groups with which one inter- with their political views and that learning acts, and the media to which one is ex- is selective: Partisans have higher knowl- posed, all of which can shape perceptions edge for facts that corroborate their world of reality. Regardless of the direction of views and lower for facts that challenge causality though, this is not about having them. Heterogeneous updating to identical different attitudes about economic or social information is also shown for attitudes to- phenomena or policies that could justifiably wards the Iraq war in Gaines et al. (2007). be viewed differently from different angles. Prior, Sood and Khanna (2015) and Bul- What is striking is rather to have different lock et al. (2015) demonstrate that people perceptions of realities that can be factually give \partisan" answers to factual questions checked. in surveys, but the partisan gap is reduced if monetary incentives are offered for cor- We highlight evidence about differences rect answers. in perceptions across the political spec- trum on social mobility, inequality, immi- I. Conceptual Framework gration, and public policies. We also show that providing information leads to differ- A simple conceptual framework can help ent reassessments of reality and different organize the empirical results reviewed responses along the policy support margin, (see Stantcheva (2019) for the full-fledged depending on one's political leaning. model). It is illustrated in Figure 1. People can hold many \perceptions," ∗ Alesina: Harvard, CEPR, IGIER and NBER, which are estimates of true parameters on a 1805 Cambridge Street, Cambridge, MA 02138 (email: variety of topics such as the share of immi- [email protected]); Miano: Harvard, 1805 Cam- bridge Street, Cambridge, MA 02138 (e-mail: ami- [email protected]); Stantcheva: Harvard, CEPR, and 1For instance, in 1988, Democrats were more likely NBER, 1805 Cambridge Street, Cambridge, MA 02138 to report that unemployment and inflation had in- (e-mail: [email protected]). creased since 1980, when the opposite was true. 1 2 PAPERS AND PROCEEDINGS MONTH YEAR grants, the share of national income going indicated again by an arrow in the figure). to the top 1%, or the elasticity of top in- People have to decide which information to comes to top tax rates. These perceptions incur costs for, which will depend on their have true empirical counterparts. \Policy baseline perceptions. Below, we describe views" are formed as functions of these per- how people with different baseline percep- ceptions and can range from the desired top tions indeed have different willingness to tax rate to the ideal level of government in- pay for information. tervention. Perceptions interact with each What makes learning particularly diffi- other: each policy view can be a function of cult in this setting is that the actual true several or all perceptions. For instance, as values of the variables that people form we will see below, a given perceived level of perceptions about either change over time social mobility will translate into different (e.g., the share of immigrants) or are dif- support for redistribution based on people's ficult to estimate, even for experts (e.g., perceptions of the competence and trust- the elasticity of unemployment to unem- worthiness of the government.2 ployment benefits). How perceptions are determined depends Finally, note that while behavioral fea- on how learning occurs. People receive \sig- tures could play a role as well, there is no nals" which are pieces of information and need to suppose that if people had the ex- which are weighted in order to be translated act same vector of perceptions, there would into a change in perceptions. Signals do not be disagreement on policy views or updat- have homogeneous impacts on all people's ing (i.e., willful ignorance or partisan bias perceptions and not all people receive the per se in the shape of the function map- same signals. People may thus end up with ping perceptions to policy views). As long very heterogeneous perceptions and misper- as people have a whole set of heterogeneous ceptions. perceptions, there will be completely differ- First, suppose that information and sig- ent policy views and any signal will be (ra- nals are costless. Even entirely rational up- tionally) acquired and weighted based on dating rules will depend on the prior level the full set of perceptions, thus leading to of (possibly, all) perceptions, as well as on different updating processes too. the weight placed on the signal. The inter- action between perceptions means that the Signals Information weight and updating for an identical signal will depend on all prior perceptions. A sig- (Weighted) nal can move more than one perception at the same time. The weight on the signal Perceptions is endogenous to perceptions (as also indi- cated by an arrow in the figure) because it could depend on its assessed reliability P1 P2 . ..PN of which is yet another perception held by people. Second, imagine information is costly to Policy views acquire. Then, in addition to the interac- Figure 1. : From Information to Policy tion between existing perceptions and up- Views dating just described, the set of signals ac- quired is also endogenous to perceptions (as II. The American Dream 2In addition, some perceptions may put consistency constraints on others. For instance, one cannot simulta- Is the American dream alive? The an- neously believe that all immigrants are unemployed, yet swer people give to this question turns out your sector's jobs are mostly taken by immigrants. This could be called \Schroedinger's" immigrant and we do to be a key determinant of support for re- not need to rely on such mental models to rationalize distribution. If perceived social or inter- the results presented. generational mobility is high, the resulting VOL. VOL NO. ISSUE THE POLARIZATION OF REALITY 3 inequalities in income and wealth are per- the middle class are very different across the ceived as more fair, since it is thought that political spectrum, as illustrated in the top everyone had more equal opportunities with panel of Figure 2. The perceived probabil- which to start. ity that a child born in the bottom quintile remains in that quintile as an adult is 37.4% for left-wing respondents and 29.5% for right-wing respondents (the correct num- ber is 33.1%).
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