Hyperbolic Memory Discounting and the Political Business Cycle

Arbeitspapier

The vintage political business cycle framework of Nordhaus (1975) represents the idea that the macroeconomic business cycle is manipulated opportunistically by an incumbent government to achieve re-election. A key assumption in this prototypical framework is that voters discount their memories about unemployment and inflation at a constant rate. Yet starting with Ebbinghaus (1885) and Jost (1897), a large body of research in psychology documents an empirical regularity that has come to be known as Jost’s Second Law of Forgetting - individuals discount recent memories at a higher rate compared to the rate at which they discount older memories. I find that incorporating this insight from psychology (i.e., hyperbolic memory discounting) into the benchmark framework moderates the amplitude of the predicted political business cycle.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5556

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• Subject: hyperbolic memory discounting ; Jost’s Second Law of Forgetting ; political business cycle ; inflation ; unemployment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Findley, T. Scott
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/123213
• Last update: 10.03.2025, 11:42 AM CET