Thoughts and Players: An Introduction to Old and New Economic Perspectives on Beliefs

Abstract

In this chapter we summarize how economists conceptualize beliefs. Moving both backward and forward in time, we review the way that mainstream economics currently deals with beliefs, as well as, briefly, the history of economists’ thinking about beliefs. Most importantly, we introduce the reader to a recent, transformational movement in economics that focuses on belief-based utility. This approach challenges the standard economic assumption that beliefs are only an input to decision making and examines implications of the intuitive idea that people derive pleasure and pain directly from their beliefs. We also address the question of when and why people care about what other people believe. We close with a discussion of the implications of these insights for contemporary social issues such as political polarization and fake news.