While the mechanisms that economists design are typically static, one-shot games, in the real world, mechanisms are used repeatedly by generations of agents who engage in them for a short period of time and then pass on advice to their successors. Hence, behavior evolves via social learning and may diverge dramatically from that envisioned by the designer. We demonstrate that this is true of school matching mechanisms – even those for which truth-telling is a dominant strategy. Our results indicate that experience with an incentive-compatible mechanism may not foster truthful revelation if that experience is achieved via social learning.

Since advice is central to what we are discussing here, it might be worthwhile to spend some time simply thinking about what advice is, what are the different types of advice we might come upon in our daily lives, and how advice is treated by different academic disciplines. That is what we do here. We ... first define what advice is, then categorize advice into some common-sense categories without expecting our categories to be either exhaustive or mutually exclusive. Finally, we discuss the way advice is treated in the economics and psychology literature, and contrast their approaches to the topic. In our next chapter, we turn our attention to conventions of behavior and the intergenerational games determining them.

The Introduction lays out the book. It introduces the concept of democratic discontent, explaining how it differs from milder forms of political displeasure and how it can manifest in different forms like populism, ethnonationalism, conspiracism, and antipathy to democratic regimes. It then briefly describes the conflict between economic and cultural approaches to discontent, showing that both make valid findings, yet neither hypothesis is totally consistent with existing research. To overcome this impasse, the chapter introduces the affective political economy theory of economics, emotions, and culture, where emotions induced by economic troubles prime large groups of citizens to embrace culturally discontented narratives; cultural discontent then produces various forms of discontent, based on local conditions. Finally, it lays out the book’s empirical approach, discussing the use of mixed methods to test the theory, including experiments, observational surveys, and qualitative analysis and comparison of cases; this section also justifies the case selections. This section advises different kinds of readers about which sections they might find most interesting and which might be less relevant, especially regarding statistically dense sections of the book.

This chapter analyzes the complex interplay of economic and cultural issues that provoked discontented movements on both the left and right in Spain. Initially, resentment over EU-backed austerity policies allowed the left-populist Podemos party to break into Spain’s party system. But the rise of a populist left that embraced multiculturalism, exacerbated by continuing economic struggles, provoked a powerful reaction on the other side of the aisle when Catalonia attempted to declare independence. This threat to national unity led to the reemergence of right-wing nationalism in the form of a new radical right political party, VOX. Using original data collected as part of the Political Systems Attitudes Study, the chapter shows that support for VOX was driven primarily by cultural discontent, but as argued throughout the book, cultural discontent itself was driven by the ongoing economic crisis.

Latin America differs from our other cases in crucial ways. It did not suffer as badly from the Great Recession as did many other regions, although it experienced its own crisis when the boom in commodity prices burst. And historically, cultural issues over race and ethnicity had not been as politicized as in Europe and North America. Nevertheless, we see a similar causal process in this region as in our other cases. As regional economies suffered, antagonism towards politics as usual increased. The nature of discontent, however, differed radically depending on the details of the dominant political order it opposed. In Brazil, discontent came to resemble Trumpism, with a focus on cultural issues that had been addressed by the formerly dominant Workers’ Party, while also addressing rampant corruption. In Chile, discontent centered on the elitism of Chile’s democracy, and the institutions that reinforced it, placed insurmountable barriers in the path of political outsiders and insurgent parties; as a result, discontent in Chile manifested as mass contention. This chapter uses analysis of existing datasets (including LAPOP and national election studies) to show how economic concerns, exacerbated by democratic deficits, drove discontent over cultural discontent, corruption, and elitism.

When new generations arrive in the world, they look around and many times remark about what a lousy job their predecessors (parents) have done. The world we leave our children we hope is better than the one we inherited, but that is many times not the case. The question then arises of how, after we have made a mess of things, we can rectify the situation. The answer is to teach our children to do better. Leave them advice that basically says “don’t do as we did, but do as we say or advise you to do”. This chapter investigates how easy this is to do. The central question is how to break out of unsatisfactory equilibria when they occur. What we find is that intergenerational advice can be beneficial in such situations but only if the advice offered is common knowledge. More precisely, it is hard to act in a risky strategic situation (like the one we place our subjects in) if you know that your opponents have been given advice as to what to do but you do not know what that advice is. In such situations, if a safe action exists, it is probably best to choose it unless you are sure that everyone else has been instructed to act responsibly and you expect them to follow that advice. It is at this juncture that common knowledge of advice matters and this is what we investigate in this chapter.

Coordination is a central feature of economic life. If we do not coordinate our activities, we are destined to waste our time and effort. However, often the way we coordinate has distributional consequences – some people receive more benefits than others. Such situations establish what Ullman Margalit (1977) call “norms of partiality” where the convention created to solve a problem bestows privileges on one set of people. If you are on the short end of the convention, you may be upset. We investigate the creation and evolution of conventions of behavior in these situations using our “intergenerational games” framework or games in which a sequence of non-overlapping “generations” of players play a stage game for a finite number of periods and are then replaced by other agents, who continue the game in their role for an identical length of time. Players in generation t can offer advice to their successors in generation t + 1. What we find is that word-of-mouth social learning (in the form of advice from laboratory “parents” to laboratory “children”) can be a strong force in the creation of social conventions.

Consider a worker with a nosy boss who continually offers suggestions and advice. Such a meddlesome supervisor creates a problem for the worker, since he or she may not want to insult the supervisor by ignoring his advice, his or her raise may depend on pleasing him, yet he or she may know that such advice is foolish and would only decrease firm profits if followed. The question we ask in this chapter is, does such a meddlesome relationship between worker and boss interfere with the learning abilities of the worker? We find the answer is a resounding no. In fact, subjects in our laboratory experiment who have what we have called meddlesome bosses advising them actually learn better than those with bosses whose advice can be ignored and fare much better than those subjects with no laboratory bosses at all.

In recent years there has been a great deal of interest in designing matching mechanisms that can be used to match public school students to schools (the student matching problem). The premise of this chapter is that, when testing mechanisms, we must do so in the environment in which they are used in the real world rather than in the environment envisioned by theory. More precisely, in theory, the school matching problem is a static one-shot game played by parents of children seeking places in a finite number of schools and played non-cooperatively without any form of communication or commitment between parents. However, in the real world, the school choice program is played out in a different manner. Typically, parents choose their strategies after consulting with other parents in their social networks and exchanging advice on both the quality of schools and the proper way they should play the “school matching game”. The question we ask here is whether chat between parents affects the strategies they choose, and if so, whether it does so in a welfare-increasing or welfare-decreasing manner. We find that advice received by chatting has proven to have a very powerful influence on decision makers, in the sense that advice tends not only to be followed but typically has a welfare-increasing consequence.