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The rise in populism in the Western world, most evident in the results of the 2016 Brexit referendum and the 2016 United States presidential election, has often been connected with the rise of social media. The unique character of social media has allowed extreme and polarised beliefs, two of the most identifiable features of populism, to emerge and spread in society through permitting the creation of echo chambers on a new larger scale, and providing new means for political campaigners and interested third parties to influence voter opinion. The abundance of information on social media might trigger voters to use simple heuristics to aggregate multiple sources of information. In this paper we report on several studies that focus on the implications of one such documented bias: "correlation neglect", the propensity to treat information sources as if they are (conditionally) independent. We discuss the relation between correlation neglect and polarisation in opinions and party platforms. We also discuss how targeted political campaigns in the presence of correlation neglect may bias voters from different groups in different directions. Specifically, competition in targeted social media campaigns increases polarisation among extreme voters but at the same time increases the randomness and unpredictability of moderates' voting behaviour. These findings are consistent with new data on the evolution of US voters' opinions in the last five decades. The data show a significant change in the trajectory of the opinions of moderates versus extreme voters starting from the mid 90s, which is consistent with the rise in the ability of campaigns more effectively to target and bombard voters with information through social media. Publisher's note: This article was edited on 04/04/2022 to include Funding Information that was omitted at the time of publication.

The rise in populism in the Western world, most evident in the results of the 2016 Brexit referendum and the 2016 United States presidential election, has often been connected with the rise of social media. The unique character of social media has allowed extreme and polarised beliefs, two of the most identifiable features of populism, to emerge and spread in society through permitting the creation of echo chambers on a new larger scale, and providing new means for political campaigners and interested third parties to influence voter opinion. The abundance of information on social media might trigger voters to use simple heuristics to aggregate multiple sources of information. In this paper we report on several studies that focus on the implications of one such documented bias: "correlation neglect", the propensity to treat information sources as if they are (conditionally) independent. We discuss the relation between correlation neglect and polarisation in opinions and party platforms. We also discuss how targeted political campaigns in the presence of correlation neglect may bias voters from different groups in different directions. Specifically, competition in targeted social media campaigns increases polarisation among extreme voters but at the same time increases the randomness and unpredictability of moderates' voting behaviour. These findings are consistent with new data on the evolution of US voters' opinions in the last five decades. The data show a significant change in the trajectory of the opinions of moderates versus extreme voters starting from the mid 90s, which is consistent with the rise in the ability of campaigns more effectively to target and bombard voters with information through social media.

In this paper we analyze elections when voters underestimate the correlation between their information sources ("correlation neglect"). We find that this cognitive bias can improve political outcomes. We show that the extreme beliefs which result from correlation neglect induce some voters to base their vote on information rather than on political preferences. We characterize conditions on the distribution of preferences under which this induces higher vote shares for the optimal policies and better information aggregation. (JEL D72, D83)

We develop a dynamic model of political competition between two groups that differ in their subjective model of the data generating process for a common outcome. One group has a simpler model than the other group as they ignore some relevant policy variables. We show that policy cycles must arise and that simple world views—which can be interpreted as populist world views—imply extreme policy choices. Periods in which those with a more complex model govern increase the specification error of the simpler world view, leading the latter to overestimate the positive impact of a few extreme policy actions. (JEL D72, D83, K42)