DP5908 | A Theory of Tolerance

Publication Date

23/10/2006

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Abstract

We develop an economic theory of tolerance where styles of behaviour are invested with symbolic value. Value systems are endogenous and taught by parents to their children. In conjunction with actual behaviour, value systems determine the esteem enjoyed by individuals. Intolerant individuals have all symbolic value invested in a single style of behaviour, whereas tolerant people have diversified values. The proposed model identifies a link between the unpredictability of children's lifestyles and tolerance. Under uncertainty, an open mind performs like an insurance against the risk of suffering a large loss in self-esteem when adult. From another angle, tolerance makes people capable of fully exploiting market opportunities. Sometimes, public policies in favour of tolerance can be recommended on efficiency grounds.