We study learning via shared news. Each period agents receive the same quantity and quality of firsthand information and can share it with friends. Some friends (possibly few) share selectively, generating heterogeneous news diets across agents. Agents are aware of selective sharing and update beliefs by Bayes’s rule. Contrary to standard learning results, we show that beliefs can diverge in this environment, leading to polarization. This requires that (i) agents hold misperceptions (even minor) about friends’ sharing and (ii) information quality is sufficiently low. Polarization can worsen when agents’ friend networks expand. When the quantity of firsthand information becomes large, agents can hold opposite extreme beliefs, resulting in severe polarization. We find that news aggregators can curb polarization caused by news sharing. Our results hold without media bias or fake news, so eliminating these is not sufficient to reduce polarization. When fake news is included, it can lead to polarization but only through misperceived selective sharing. We apply our theory to shed light on the polarization of public opinion about climate change in the United States.

To ensure that individual actors take certain actions, community enforcement may be required. This can present a rules-versus-discretion dilemma: it can become impossible to employ discretion based on information that is not widely held, because the wider community is unable to verify how the information was used. Instead, actions may need to conform to simple and widely verifiable rules. We study when discretion in the form of exceptions to a simple rule can be implemented, if the information is shared by the action taker and a second party, who is able to verify for the larger group that an exception is warranted. In particular, we compare protocols where the second party excuses the action taker from taking the action ex ante with protocols where the second party instead forgives a rule-breaking actor ex post.

Do mandatory spending programs such as Medicare improve efficiency? We analyze a model with two parties allocating a fixed budget to a public good and private transfers each period over an infinite horizon. We compare two institutions that differ in whether public good spending is discretionary or mandatory. We model mandatory spending as an endogenous status quo since it is enacted by law and remains in effect until changed. Mandatory programs result in higher public good spending; furthermore, they ex ante Pareto dominate discretionary programs when parties are patient, persistence of power is low, and polarization is low.