Knowledge that Transforms

We review the literature on models that try to explain human behavior in social interactions described by normal-form games with monetary payoffs. We start by covering social and moral preferences. We then focus on the growing body of research showing that people react to the language with which actions are described, especially when it activates moral concerns. We conclude by arguing that behavioral economics is in the midst of a paradigm shift toward language-based preferences, which will require an exploration of new models and experimental setups.

In this essay on Elster’s (2020) book, I expose my concerns about the ability of behavioral tools to correctly address the transition phase between the absolutist regime and the democratic institutions inherited from the French Revolution. Rehabilitating the forgotten analyses of contemporary political philosophers Quinet, de Sade, and Leroux, I defend the view that a correct understanding of the French Revolution’s essence lies in its political philosophical dimension, not in the supposed psychological traits of its actors. I suggest a renewed way to apprehend and model revolutions, combining three levels of analysis: political philosophy, macroeconomic dynamics, and complexity economics.

What is the most efficient way of designing incentives in an organization? Over the past five decades, agency theory has provided various answers to this crucial question. This line of research suggests that, depending on the organizational context, the optimal approach to providing incentives may involve either relying on collective compensations or, conversely, employing relative performance evaluations. In the first scenario, cooperation among agents is the key aspect of the organization. In the second, competition prevails. This paper provides a comprehensive overview of this extensive literature with the aim of understanding the conditions under which one or the other type of incentive schemes is more desirable for the principal of the organization. To this end, we use a flexible and versatile model capable of addressing a wide range of scenarios characterized by different technologies, information constraints, and behavioral norms.

Wars impose tremendous costs on societies and the question of how to end them is of foremost importance. Several hundred books and scientific articles have been written on peace agreements and third-party interventions. In this article I provide a critical literature survey on what policies foreign countries have at their disposal if they wish to foster peace abroad. Ranging from pure (nonmilitarized) mediation, over a range of military options to economic policies, the promises and pitfalls of these types of interventions are critically assessed in the light of cutting-edge theoretical and empirical literature. A series of take-home messages emerge: (i) establishing a causal effect of mediation has proven difficult; (ii) military peacekeeping operations can play a key role, to the extent that security guarantees, the sharing of political and military power, and trust-building measures are well coordinated; and (iii) money matters—fostering human capital and economic opportunities contributes to fertile ground for lasting peace.

Central banks are increasingly reaching out to the general public to motivate and explain their monetary policy actions. One major aim of this outreach is to ensure accountability and create trust; another is to guide inflation expectations. This article surveys a rapidly growing literature on central bank communication with the public, rather than with the financial markets. We first discuss why such communication matters and is more challenging than communicating with expert audiences. Then we turn to methods: How do central banks try to reach the public, and do they succeed? Next, and importantly, we survey the empirical evidence on the extent to which this new outreach affects inflation expectations. On balance, we see some promise in the potential to inform the public better, but many challenges along the way.

This book offers a radical thesis: Technological innovation often benefits elites while worsening conditions for workers, challenging the common view that technology always improves living standards. Through historical transitions like the Industrial Revolution, the authors illustrate how innovations have frequently led to worker exploitation. They argue that governance, rather than competition, determines whether technological advances benefit society. In the digital age, platforms exploit user data without fair compensation, causing harm through addictive services and poor regulation. The book calls for stronger regulations to protect consumers and ensure that innovation aligns with societal well-being, especially as artificial intelligence spreads.

We provide a guide to the burgeoning literature on the economics of social media. We first define social media platforms and highlight their unique features. We then synthesize the main lessons from the empirical economics literature and organize them around the three stages of the life cycle of content: (i) production, (ii) distribution, and (iii) consumption. Under production, we discuss how incentives affect content produced on and off social media and how harmful content is moderated. Under distribution, we discuss the social network structure, algorithms, and targeted advertisements. Under consumption, we discuss how social media affects individuals who consume its content and society at large, and explore consumer substitution patterns across platforms. Throughout the guide, we examine case studies on the deterrence of misinformation, segregation, political advertisements, and the effects of social media on political outcomes. We conclude with a brief discussion of the future of social media.

We survey recent theoretical and empirical literature on political economics of non-democracies. Nondemocratic regimes face multiple challenges to their rule, both internal, such as palace coups or breakdown of their support coalition, and external, such as mass protests or revolutions. We analyze strategic decisions made by dictators from the standpoint of maximizing the chances of regime survival in the light of these challenges, and show how it explains multiple common patterns, from hiring political loyalists to positions that require competence, to restricting media freedom at the cost of sacrificing bureaucratic efficiency, to running propaganda campaigns, organizing election fraud, purging opponents and associates, and repressing citizens.

A vibrant literature incorporates elements of bounded rationality into choice theory. We survey this work, discussing five central ways in which the literature has modeled departures from the rational choice procedure. We discuss the variety of purposes axiomatic choice characterizations serve for these positive theories, delve into experimental tests, synthesize the welfare debate, and assess important future directions.

Racial disparities permeate every single stage of the criminal legal process. In Shadows of Doubt: Stereotypes, Crime, and the Pursuit of Justice, Brendan O’Flaherty and Rajiv Sethi shed light on the stereotype-driven biases that contribute to these disparities. In this article, I review the compelling evidence in the book and expand upon it by outlining the myriad intertwining mechanisms contributing to racial disparities in criminal legal contact. I argue that reducing stereotype-driven biases is a crucial step toward equity, but a broader systemic overhaul is necessary to substantively address the entrenched racial biases in the criminal legal system.