Research
Working Papers
Abstract: Through theoretical and experimental analysis, this study explores the role of empathy in economics and its implications for redistribution. Empathy is defined as accurately simulating others’ feelings, distinct from altruism. Self-interested wealthy individuals may choose not to be empathetic towards the poor to justify limited redistribution. However, diverse personal experiences counteract this self-serving motivated reasoning, promoting greater empathy and redistribution. I formalize the mechanism with a model and conduct a laboratory experiment with exogenous variations in experience and information to validate the model’s predictions. Empirical results affirm the motivated reduction of empathy and underscore the mitigating effect of experience.
with James Andreoni and B. Douglas Bernheim
Abstract: Validation of happiness measures is inherently challenging because subjective sensations are unobserved. We introduce a novel validation method: subjects report how happy they would feel (or did feel) after some specified event, as well as how they would respond (or would have responded) to a survey question about their happiness after the same event. The difference between these two responses measures “self-reported misreporting.” We demonstrate that self-reported misreporting varies across events and is substantial for certain types of events. These findings imply that caution is warranted when interpreting differences in self-reported well-being across contexts.
Is Trading Hazardous to Your Utility?
Extended Abstract (Full Draft Coming Soon)
with Sandro Ambuehl and B. Douglas Bernheim
Abstract: We use a framed field experiment to study the quality of trading decisions undertaken by small individual investors of the type who trade on platforms such as Robinhood. Our design allows us to assess the extent to which investors' choices further their own objectives, in that we compare the choices they make to those they would have made if they properly understood the implications of their actions for the distribution of their payoffs. We find that trading actively, and delegating with strategic instructions, both improve upon random trading, but only to a relatively modest degree, in the sense that traders do not achieve most of the available welfare gains. Even though active trading strategies often diverge substantially from trading instructions when delegating, active trading does not significantly increase welfare losses relative to delegation. We also study the relationships between the quality of trading decisions and factors such as trading style, financial literacy, and susceptibility to specific belief fallacies.