Emotion-driven negative policy bubbles

摘要

Existing explanations of systematic undersupply of policy (e.g., institutional frictions, policy drift, and loss aversion) highlight the role of institutional and cognitive factors in the policy process while paying little attention to the role of emotions and emotional sentiments (e.g., policy mood). To bridge this gap, this article conceptualizes the role of negative emotions (e.g., fear, anger, hatred, disgust) and emotional sentiments in driving systematic policy underreaction (or what I have termed a negative policy bubble). Regarding the birth of emotion-driven negative policy bubbles, the behavioral understanding advanced here points to (1) an endogenous process that affects opinion formation, attention, learning, behavior, and attitudes; (2) an exogenous shock that "turns on" an endogenous process; (3) emotional manipulation by emotional entrepreneurs, or (4) a process by which the psychological context within which the policy process takes place conditions policy dynamics. Self-reinforcing processes interact with the contagion of emotions, imitation, and herd behavior to reinforce the lack of confidence in the policy, thereby creating a lock-in effect of systematic undersupply of policy. This process may be interrupted following modest endogenous or exogenous perturbations; a decrease in the intensity and duration of negative emotions and/or an increase in their speed of decline by emotional entrepreneurs, as well as following the reduction in negativity bias when the information environment becomes predominantly negative. The paper also provides guidance on productive directions for future research.