22 May 2017Time: 3:00 - 4:15pm
Abstract: A defining feature of culture is similarity in the manner in which information about the world is interpreted. This makes it easier to extract information from the beliefs of those within one's own group. But this information itself may be of low quality if better informed sources lie elsewhere. Furthermore, observing individuals outside one's culture deepens our understanding not only of those individuals, but also of their group. We model this process, using unobservable, heterogeneous priors to represent fundamental belief differences across individuals; these priors are correlated within but not across groups. Within this framework, we obtain the following results. First, groups that are smaller and have higher levels of correlation in perspectives will be more likely to exhibit homophily to begin with. If the correlation in perspectives is sufficiently high, then this homophily persists over time, resulting in homogeneity and insularity in observational patterns. If not, then persistent behavioral heterogenity can arise both within and across groups, even if individuals in the same group are identical at the outset. Patterns of observation exhibit considerable structure. Under certain conditions - which depend on the variability across individuals in the quality of information, initial uncertainty about the perspectives through which this information is filtered, and the degree to which these perspectives are correlated - individuals in each group can be partitioned into two categories. One of these exhibits considerable homophily, rarely if ever stepping outside group boundaries, while the other is unbiased and seeks information wherever it is most precise.
About Professor Rajiv Sethi
Rajiv Sethi joined the faculty of Barnard College, Columbia University in 1995. He is currently on the editorial board of the American Economic Review and the external faculty at the Santa Fe Institute.
Professor Sethi's research and teaching is focused primarily on finance, inequality, crime, and communication. In recent work, he has examined segregation in neighborhoods and social networks, stereotyping in economic interactions, disparities across groups in crime victimization and incarceration, and the transmission across generations of group inequality.