How Can Governments Respond to Policy Bubbles Driven by Dysfunctional Emotions?

31 Pages Posted: 13 Sep 2021 Last revised: 13 Dec 2021

See all articles by Moshe Maor

Moshe Maor

The Hebrew University of Jerusalem

Date Written: December 12, 2021

Abstract

People at times experience intense dysfunctional emotions that distract their judgment regarding policy problems, policy tools, and/or target populations, leading to the emergence of policy bubbles (i.e., policy over- or underproduction over an extended period). In this paper, I elaborate on three strategies that governments can implement when faced with policy bubbles driven by such emotions: the wait-and-see approach, the emotional containment approach, and the bubble-pricking approach. Based on studies of policy bubbles and on the important literature regarding how different emotions may result in diverse behavior and judgment, I elaborate on the conditions under which each of these policy options may be the appropriate path to follow when encountering such policy bubbles. I conclude that the case for a wait-and-see approach is strong, among other instances, when such bubbles cannot be detected with a reasonable level of confidence while they are still in the initial overinvestment phase; the case for emotional containment is strong when policymakers are interested in preventing such bubbles from getting out of hand, yet they are politically constrained to better calibrate the policy investment to the policy problem; and the case for the bubble-pricking approach is strong when (i) the growth of policy bubbles driven by dysfunctional emotions causes significant harm, and (ii) governments do not have at their disposal the necessary tools to keep the harmful effects of such policy bubbles and their burst at a manageable level. Policymakers should also tailor their response to the particular characteristics of the policy bubble at hand and to the dysfunctional emotions sustaining it.

Keywords: policy bubbles, dysfunctional emotions, affective processes, emotional entrepreneurs

JEL Classification: E03, E3, E44, E5, E6

Suggested Citation

Maor, Moshe, How Can Governments Respond to Policy Bubbles Driven by Dysfunctional Emotions? (December 12, 2021). Available at SSRN: https://ssrn.com/abstract=3920860 or http://dx.doi.org/10.2139/ssrn.3920860

Moshe Maor (Contact Author)

The Hebrew University of Jerusalem ( email )

Jerusalem
Israel

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