Belief Systems and Confirmation Bias

Abstract

Abstract Chapter 8 uses lessons from the new institutional economics and the concepts of confirmation bias and belief systems to explain why so many people are reluctant to change their views about the U.S. markets and about the desirability of additional government regulation. The chapter begins by describing the development of belief systems, the filter through which people see the world. It explains how people create mental models of the world to simplify things and how people use heuristics and rules of thumb to help make decisions. Once people develop their views of how the world works, confirmation bias makes it difficult to change them. People have a tendency to pay attention to the information that reinforces their prior beliefs and to disregard information that challenges them. In addition, the vast majority of people have much more to think about than the relationship between the market and the government, so they do not pay much attention to details. The chapter uses studies about the rigidity of political views as an example to show the difficulty in changing the public’s acceptance of the harm done to workers by mergers and outsourcing.