Meritocracies aspire to reward hard work and promise not to judge individuals by the circumstances into which they were born. However, circumstances often shape the choice to work hard. I show that people’s merit judgments are “shallow” and insensitive to this effect. They hold others responsible for their choices, even if these choices have been shaped by unequal circumstances. In an experiment, U.S. participants judge how much money workers deserve for the effort they exert. Unequal circumstances disadvantage some workers and discourage them from working hard. Nonetheless, participants reward the effort of disadvantaged and advantaged workers identically, regardless of the circumstances under which choices are made. For some participants, this reflects their fundamental view regarding fair rewards. For others, the neglect results from the uncertain counterfactual. They understand that circumstances shape choices but do not correct for this because the counterfactual—what would have happened under equal circumstances—remains uncertain.

Many consumers care about climate change and other externalities associated with their purchases. We analyze the behavior and market effects of such “socially responsible consumers” in three parts. First, we develop a flexible theoretical framework to study competitive equilibria with rational consequentialist consumers. In violation of price taking, equilibrium feedback nontrivially dampens the impact of a person’s consumption on aggregate consumption, undermining the motive to mitigate. This leads to a new type of market failure, where even consumers who fully “internalize the externality” overconsume externality-generating goods. At the same time, socially responsible consumers change the relative effectiveness of taxes, caps, and other policies in lowering the externality. Second, since consumer beliefs about and preferences over their market impacts play a crucial role in our framework, we investigate them empirically via a tailored survey. Consistent with our model, consumers are often consequentialist, and many believe that they have a dampened impact on aggregate consumption. Inconsistent with our model, however, we also find many respondents who expect to have a one-to-one impact on aggregate consumption. Third, therefore, we analyze how such “naive” consumers modify our theoretical conclusions. They consume less than rational consumers in a single-good economy, but may consume more in a multigood economy with cross-market spillovers. A mix of naive and rational consumers may yield the worst outcomes.

We document the individual willingness to act against climate change and study the role of social norms in a large sample of US adults. Individual beliefs about social norms positively predict pro-climate donations, comparable in strength to universal moral values and economic preferences. However, we document systematic misperceptions of social norms. Respondents vastly underestimate the prevalence of climate-friendly behaviors and norms. Correcting these misperceptions in an experiment causally raises individual willingness to act against climate change and individual support for climate policies. The effects are strongest for individuals who are skeptical about the existence and threat of global warming.