Research

People often judge how much “the rich” deserve to be rich by taking into consideration how they had made their wealth. How do people make such judgments about the origins of others' wealth? In nine studies (N = 1707) and two supplemental analyses (N = 197), we examine whether the attributions people make about wealth are influenced by the way wealthy people spend their money. We find that people are more likely to attribute economic success to internal factors (such as hard work and competence) when “the rich” spend their money charitably versus when they spend it in a more luxurious manner. Moreover, we find that the tendency to attribute wealth to internal factors is due to judgments about wealthy individuals' character, and that the influence of spending on trait attribution is substantially larger for merit-related traits (e.g., persistence or industriousness) than other positive traits that are unrelated to merit (e.g., elegance or youthfulness). Finally, we find that how “the rich” spend their fortunes influences beliefs about how much they deserve to be rich. The more wealthy people give their money to charity, the more people believe that they deserve to have it in the first place.

I examine how financial markets interact with news about the COVID-19 pandemic. A twelve topic model optimizes the trade-off between number of topics and topic coherence. Using this model, I show that before mid-March 2020 markets react more to the same quantum of news when volatility is higher – a phenomenon I call hypersensitivity. Formal tests identify a structural break in mid-March, post which markets are no longer hypersensitive. In the hypersensitive stage, markets are overly volatile and overreact to news. Despite hypersensitivity, lagged prices better forecast future COVID-19 case counts than do lagged news.

The covid-19 crisis has led to a sharp deterioration in firm and bank balance sheets. The government has responded with a massive intervention in corporate credit markets. We study equilibrium dynamics of macroeconomic quantities and prices, and how they are affected by government policy. The interventions prevent a much deeper crisis by reducing corporate bankruptcies by about half and short-circuiting the doom loop between corporate and financial sector fragility. The additional fiscal cost is zero since program spending replaces what would otherwise have been spent on intermediary bailouts. The model predicts rising interest rates on government debt. We propose a more effective intervention with lower fiscal cost. Finally, we study longer-run consequences for firm leverage and intermediary health when pandemics become the new normal.

This note studies optimal lockdown policy in a model in which the government can limit a pandemic's impact via a lockdown at the cost of lower economic output. A government would like to commit to limit the extent of future lockdown in order to support more optimistic investor expectations in the present. However, such a commitment is not credible since investment decisions are sunk when the government makes the lockdown decision in the future. The commitment problem is more severe if lockdown is sufficiently effective at limiting disease spread or if the size of the susceptible population is sufficiently large. Credible rules that limit a government's ability to lock down the economy in the future can improve the efficiency of lockdown policy.

The largest economic cost of the COVID-19 pandemic could arise if it changed behavior long after the immediate health crisis is resolved. A common explanation for such a long-lived effect is the scarring of beliefs. We show how to quantify the extent of such belief changes and determine their impact on future economic outcomes. We find that the long-run effect of the COVID crisis depends crucially on whether bankruptcies and changes in habit make existing capital obsolete. A policy that avoided most permanent separation of workers from capital could generate a much larger benefit than originally thought, that could easily be 180% of annual GDP, in present value.

This note studies optimal lockdown policy in a model in which the government can limit a pandemic's impact via a lockdown at the cost of lower economic output. A government would like to commit to limit the extent of future lockdown in order to support more optimistic investor expectations in the present. However, such a commitment is not credible since investment decisions are sunk when the government makes the lockdown decision in the future. The commitment problem is more severe if lockdown is sufficiently effective at limiting disease spread or if the size of the susceptible population is sufficiently large. Credible rules that limit a government's ability to lock down the economy in the future can improve the efficiency of lockdown policy.

A crucial element of navigating group conflict is how group members manage stigma imposed on them by other groups. Across three experiments, we propose that group identification is a cause and consequence of self‐labeling with stigmatizing group labels, a practice known to reduce stigma. Experiment 1 found that group identification increased self‐labeling with a stigmatizing group label. In Experiment 2, individuals who self‐labeled with a stigmatizing group label felt more identified with their group, which reduced the label's perceived negativity; they also persisted longer on an in‐group helping task, an effect that was partially mediated by group identification. In Experiment 3, observers perceived self‐labelers as more identified with their group and as viewing the label less negatively; perceived group identification mediated the relationship. Group identification is a critical component in reappropriating stigmatizing labels and provides insight into how highly identified members can navigate group conflict by negotiating their group's identity.

This article examines the diffusion of protest tactics among social movement organizations (SMOs) through their collaboration in protest groups. Using a longitudinal data set of SMO protest activity between 1960 and 1995, the authors adapt novel methods for dealing with two forms of selection and measurement bias in network analysis: (i) the mechanism that renders some SMOs more likely to select into collaboration and (ii) the notion that diffusion is an artifact of homophily or indirect learning rather than influence. The authors find that collaboration is an important channel of tactical diffusion and that SMOs with broader tactical repertoires adopt more tactics via their collaboration with other SMOs, but only up to a point. Engaging in more collaboration also makes SMOs more active transmitters and adopters of new tactics. Finally, initial overlap in respective tactical repertoires facilitates the diffusion of tactics among collaborating SMOs.

We perform an econometric analysis of the effect of new drug launches on longevity, using data from the IMS Health Drug Launches database and the WHO Mortality Database. Under conservative assumptions, our estimates imply that the average annual increase in life expectancy of the entire population resulting from new drug launches is about one week, and that the incremental cost effectiveness ratio (new drug expenditure per person per year divided by the increase in life-years per person per year attributable to new drug launches) is about $6750 — far lower than most estimates of the value of a statistical life-year.