Eliana La Ferrara is one of the leading researchers in development economics and has pioneered the studies of the role of culture and identity in economic behavior. Together with renowned economist Alberto Alesina, La Ferrara worked on issues of trust and ethnic diversity. From childhood, La Ferrara knows how important cultural differences are and from her own experience: she was born in Sicily, but grew up in northern Italy, in Lombardy, where the way of life is much closer to that of Switzerland.
After receiving her PhD from Harvard in 1999, La Ferrara returned to Milan's Bocconi University, where she continues her research in development economics and leads the Laboratory for Effective AntiPoverty Policies. On Thursday, November 12, La Ferrara delivered a lecture “Societal diversity and discrimination: changing stereotypes” as part of a series of Honorary lectures in memory of Alberto Alesina organized by NES. In an interview with Econes, La Ferrara talks about researching social capital during the pandemic, the role of television series and the ambition trap.
– Eliana, hello! Thank you very much for making this conversation with us. And I would like to start by mentioning the works that you did with Alberto Alesina. You studied various factors that influence how much people trust each other. And the factors that affected the trust negatively were having a traumatic experience and being economically unsuccessful, facing economic hardship. And actually, that’s what’s happening now: we can see that with the pandemic a lot of people faced hardship, a lot of people are frightened, worried. So in your view how would that affect trust among each other?
– Yes, indeed the issue of trust is actually crucial to understand the response to COVID-19. And there is a very close link between trust and people’s compliance with regulations for COVID. And in fact, you can see that around the world lockdown measures seem unacceptable when people have low trust in government or in others in their society...
– Sorry to interrupt you briefly. I think that’s an important issue: you mentioned both the trust in government and the trust in each other. Which one is more important when we’re speaking about the response to COVID-19 and other issues?
– My sense is that trust in government, in this case, is actually the most important thing because what happens is that people want to understand why certain measures are put in place. Is it because they are actually based on science, on reasons other than capricious willingness to limit freedom? So they want to understand if they make a sacrifice because the leaders who ask this sacrifice deserve their trust. There is an issue of also trusting that other members of society will comply. So I could say, “If I don’t expect others to do the same why should I bear personal costs”. But I think the evidence we have so far is that it’s actually trust in institutions and in government that matters. And there are some very interesting studies that have been done since last spring.
For example, there is a study by three Italians, [Ruben] Durante, [Luigi] Guiso, and [Giorgio] Gulino, that studied compliance with mobility restrictions in Italy immediately after March. And they saw that if you compare provinces with high and low social capital – so this is the measure that also includes trust – basically if every province in Italy was like the top 25% the number of deaths would have been cut by 10 times. And there’s a study now by two French... two people at Bordeaux, [Olivier] Bargain and [Ulugbek] Aminjonov, who’ve looked at Europe, all the countries. They use Google data on mobility to see if people respect these regulations or not – about mobility restrictions. And they see that mobility is lower in countries that have higher trust in government from the European Values Survey. And even within country – so they compare regions where trust in politicians is high, higher than the national average, and regions where it’s lower than the national average. And they find that those with high trust have decreased their mobility by 15% more than the others. So the fact that people believe that these restrictions are imposed by politicians who deserve some credit invites them to comply in some way.
– And as for the dynamics, the changes in trust – can we see any? And how has the pandemic changed the way people treat each other, treat the government?
– I don’t know, I don’t think there have been as many studies on trust in people in response to the pandemic as opposed to the side related to institutions and government. I think at least from observations or reading the papers what you can see is there are some episodes of solidarity and certain categories of people who actually gain a lot of trust – careworkers, for example, who risk their lives. There is a sense of cohesion in society around certain groups and also now solidarity with small businesses, people who are losing their jobs.
So that part tends to bring people together but you also see sometimes a bit of scapegoating – trying to blame this on some groups, some parts within society. And that could actually maybe polarize society as well. And also when different politicians in the country or different parties take very different positions on the response, on the adequate response to COVID-19 that also basically polarizes people. And it might lead to an increase in in-group trust but a decrease in out-group trust. I think that’s something that eventually we would be able to measure and observe. There’s not so much work as of now yet.
– It’s a very interesting issue, this in-group trust versus the out-group trust. Which one of them is more positive for economic development, for economic growth? And has there been some research previously, before the pandemic, that shows the importance of this in-group trust and out-group trust for the way societies evolve?
– Yes, so there are very famous studies done by political scientists, for example, and studies that compare these in-group and out-group [trust]: Diego Gambetta has a study on Italy, for example. And these types of studies were traditionally associated with trying to understand phenomena like the mafia, for example, where you have a very strong in-group trust but little out-group trust. And also familial relationship – there are societies where families or extended families are really the basis of social structure and there is extremely high in-group trust but then skepticism towards others. I would say that probably what makes the difference and what distinguishes successful from less successful societies in terms of institutional performance is the extent to which people are able and willing to trust members of other groups. This is where, for example, certain Nordic countries in Europe have traditionally scored very high, with this out-group trust, while other countries, maybe more in Southern Europe, have a clear distinction where people you know you trust completely but you’re a bit more careful when dealing with others. So I would say both are important but really what makes a difference for institutional performance and eventually economic growth is whether societies have taken the step of trusting others.
– And how do societies take this step? I mean how do you transform the in-group trust into out-group trust? Is it possible?
– Yes, some of what I talk about in my lecture, for example, is about getting to know members of the out-group and the fact that sometimes this low trust is nurtured by a certain set of beliefs and stereotypes that portray the other group as less similar to you, with different interests, different goals. And so there is encouraging evidence from recent studies where exposure to people who are different but with enough interaction – that you get to know them well and you get to see the similarities – can actually help build such trust.
But I think one of the main actors that I would call into play if I were to address the trust problem is really the media, the media because all of it comes from the information you receive: why things go well or go wrong, and also how either the institutions or the people are portrayed, what type of image you form of this – positive, negative, how much you understand the reasons why they do what they do. And this is where I think the media can play a big role.
– Given that the media are regarded as trustworthy because we can see that the trust in media is also in decline in a lot of parts of the world.
– That’s an absolutely good point. When I think of media I’d like to make a distinction. So, there are media when media reports about politics. And I think of course there’re potential biases, there’s potential media capture. And it’s not extremely easy to fix this problem. Part of it has to do with revenues and income sources of the media industry. But when I say media, I also have in mind a gigantic share of the sector, whose primary purpose is, at least officially, that of entertaining people. I have done a lot of work on entertainment media and how these entertainment media can be used for development purposes. Let me give you examples of programs that could be TV series or movies where you can embed in the narrative concepts that help you pass on a message to the population about something useful. There’re cases where these TV series are being scripted so as to improve public health or education or family relations but we could easily see also how, when you discuss certain issues like migration or refugees, all these things, you are also giving to society an image of who these people are. And this really can help create trust.
– Changing gears a little bit, another topic of your research, and I think it is particularly relevant for Russia, particularly important, is this issue of aspirations trap. Could you, please, elaborate a little bit on that and the question is how do we overcome the aspirations trap?
– The issue of aspirations trap is something that economists have been discussing in recent years. There is a very well-known notion of poverty trap in the literature where the idea is that because you lack certain resources, material resources, you cannot invest enough. And because you don’t invest enough you remain poor and then you lack resources and so it’s a vicious circle. With aspirations trap, the notion is that for given resources you might think that certain goals are beyond your reach. So, think about the type of job that you want to have or the type of education that you want to achieve. And then the fact that you think it’s not feasible for you means that you don’t even make the effort to try. If you don’t even make the effort, of course, you’re not going to get a good job or a high level of education. And so, again, you have this vicious circle which in this case is not coming from the fact that you don’t have enough money necessarily. It could simply come from this element of, if you wish, low self-confidence or inability of seeing yourself making certain ambitious choices.
What you can do here is to think about breaking the aspiration trap through interventions that act on the psychology of people. This is an area, where behavioral economics becomes important, the intersection between psychology and economics. We have worked, for example, in Italy, with students from middle schools in the time when they have to choose a high school and these high schools have different degrees of difficulty and also this correlates with how good a job and how high a wage you’re going to have later on. And what we had seen was that immigrant children around the age of 14 or 13, even if they were doing well at school, very often ended up applying to vocational schools, which are those that give you a lower-level, kind of blue-collar type of job. We decided to select promising immigrant students across about 150 schools in Northern Italy and assign them a counselor who was going not only to explain how the system works but also meet with them regularly and build their skills and their capacity to understand their potential. And what we found is that the choices of these students actually changed after a year and also their grades at school became better. Potentially this is a really important path to social mobility for groups in society that don’t have very good social networks or educated parents. I think, as an example, this working on their aspirations without giving them more money or giving them other resources has helped and it can be extended to another context.
– So, basically, a part of the solution to this huge inequality of opportunities problem is working with aspirations.
– I want to be a little cautious in how we interpret this in the following sense: yes, I believe that by working on aspirations you can certainly achieve and partly reduce this gap of opportunities. I don’t think it is sufficient in and of itself. There is also in the literature an acknowledgment that if you boost aspirations too much and then this person doesn’t achieve those aspirations the fall in terms of morale and subsequent consequences might be even worse than how you started from. So, you don’t want to have this very big disappointment coming from the fact that you only worked on aspirations, and then the person didn’t have the means of achieving something.
The intervention I described is one in Italy where if you want to enroll in a certain high school you can do it, there’s almost no filter. In other systems, it could be that the same intervention works very badly because you try to enter a high school, and then you don’t get admitted. If you think that the material side is not necessarily the constraint, then working on the aspiration might be the solution. But in many instances, I would say the two are complex. So, you also need to work on providing people with the assets, with enough income and enough skills if it’s about training.
– And just a part of it is working with aspirations. My last question will be... maybe it’s close to this topic, it’s the issue of beliefs. A lot of your studies deal with beliefs that people have about how they should act and what is right and what is wrong. And I think it’s a big question for policy-making too because a lot of policy-making depends on people’s beliefs. So, my question is, from your experience, under what circumstances people are more eager to change beliefs in a way that will be more efficient for them? So, how do you work with beliefs?
– Yes, so, that’s a very interesting question. I think I would say that people will change their beliefs when two conditions are met. Changing a belief typically occurs when there’s some new information: you have a certain prior belief and then new information comes in, and you may update or not update. So, I think there’re two conditions that need to be met for you to update. The first is that the source of this new information is something that you trust. The second point is that you see this new information and you have to think that this is relevant for you. Many times people don’t react to facts. Even though the facts are clear they just choose to disregard those facts. I think that is because they don’t see them as speaking to themselves in a way that’s meaningful.
This second thing is a lot more again behavioral. This is where we need, I think, to get also at the emotions of people. In the type of work that I’ve done, which is on the development policies and on how to use, for example, entertainment media to change people’s beliefs about risky sex or ust development policy the way we make it meaningful and impactful is by choosing certain characters who look a lot like the target audience that you have, who share with the target audience the same difficulties, the same imperfections. So, basically, having the message delivered by someone with whom the viewer or reader can identify and empathize. You can see how even in politics nowadays this is a very big factor for success, you know, that the citizens see you as one of them. But in terms of changing beliefs, I think that working on how accurate the information is, the trustworthiness of the source, but also on the way in which we deliver it. Speaking to the people in a way that they will immediately identify and empathize is what will lead to change.
– So that they feel that this message comes from someone that is very close to them. Like a hero from a TV show. But sometimes people relate to the heroes they see on screen.
– Yes, because they could think that something you say is true but if you are from a completely different world there’s nothing for me to learn, “Okay, okay, it’s true, I trust you, but it doesn’t speak to me”. So, we need to have the two things: it’s true, and yes, I need to act on this, because I’m like her, and if it matters to her, it matters to me as well.
– That’s a very inspiring message. Thank you very much, and have a nice day.
– Thank you, bye.