Zimmermann, Florian. 2020.
American Economic Review, 110 (2): 337-61.
A key question in the literature on motivated reasoning and self-deception is how motivated beliefs are sustained in the presence of feedback. In this paper, we explore dynamic motivated belief patterns after feedback. We establish that positive feedback has a persistent effect on beliefs. Negative feedback, instead, influences beliefs in the short run, but this effect fades over time. We investigate the mechanisms of this dynamic pattern, and provide evidence for an asymmetry in the recall of feedback. Finally, we establish that, in line with theoretical accounts, incentives for belief accuracy mitigate the role of motivated reasoning.
From the Discussion
In light of the finding that negative feedback has only limited effects on beliefs in the long run, the question arises as to whether people should become entirely delusional about themselves over time. Note that results from the incentive treatments highlight that incentives for recall accuracy bound the degree of self-deception and thereby possibly prevent motivated agents from becoming entirely delusional. Further note that there exists another rather mechanical counterforce, which is that the perception of feedback likely changes as people become more confident. In terms of the experiment, if a subject believes that the chances of ranking in the upper half are mediocre, then that subject will likely perceive two comparisons out of three as positive feedback. If, instead, the same subject is almost certain they rank in the upper half, then that subject will likely perceive the same feedback as rather negative. Note that this “perception effect” is reflected in the Bayesian definition of feedback that we report as a robustness check in the Appendix of the paper. An immediate consequence of this change in perception is that the more confident an agent becomes, the more likely it is that they will obtain negative feedback. Unless an agent does not incorporate negative feedback at all, this should act as a force that bounds people’s delusions.