Chapter 2 explains how the Economist Mental Model (EMM) is measured by capturing two key dimensions: familiarity with core economic concepts (e.g., inflation, supply–demand, market dynamics) and the application of economic reasoning tools (e.g., cost–benefit analysis, opportunity costs, marginal analysis). This measurement approach uses an index of “economic knowledge,” drawn from original surveys in the US, Italy, and the UK. By assessing both factual economic knowledge and the ability to apply it to hypothetical scenarios, the index distinguishes EMM users (high economic knowledge) from those with Alternative Mental Models (AMMs) (low economic knowledge). Descriptive findings reveal that older, educated, wealthier men tend to score higher, with no strong partisan gap. Notably, EMM adopters do not value economic objectives more than those with AMMs, highlighting that differences in policy choices likely stem from how trade-offs are interpreted rather than divergent fundamental values. Demonstrating strong consistency across contexts, these measures set the stage for subsequent empirical analyses.

The conclusion unifies the book’s central theme: Mental models shape how people evaluate trade-offs, process information, and choose policies. Those with the Economist Mental Model systematically weigh costs and benefits, integrate new evidence, and ultimately favor measures that maximize aggregate welfare – even if such policies require short-term sacrifices. In contrast, those with Alternative Mental Models rely on different heuristics, often supporting short-term, populist policies that can undermine long-term prosperity. Across policy areas ranging from Brexit to AI, individuals who think like economists prove more receptive to economic information and less swayed by zero-sum narratives. Yet, these findings highlight a demographic skew in economic knowledge, skewing older, educated, wealthier, and male. The conclusion stresses the urgency of democratizing economic reasoning, showing that targeted interventions can broaden its reach. Ultimately, empowering diverse populations to think more like economists holds promise for forging consensus around policies that balance immediate concerns with long-term gains.

This chapter discusses how quantitative tightening is conducted and the arguments surrounding the pace at which it is undertaken as well as how to gauge when to stop.

Chapter 1 outlines how mental models – cognitive frameworks for interpreting the political economy – shape policy preferences. It contrasts the Economist Mental Model (EMM), marked by a strong grasp of fundamental economic concepts and economic reasoning tools, with Alternative Mental Models (AMMs), which lack systematic economic reasoning. Equipped with tools like cost–benefit analysis, EMM adopters recognize intertemporal trade-offs, possible positive-sum outcomes, and distributional impacts, aligning decisions more effectively with aggregate welfare. In contrast, AMM users focus on immediate, visible effects and often adopt zero-sum thinking, leading to policies that cater to short-term priorities but diminish aggregate welfare over time. Crucially, Chapter 1 stresses that the EMM does not imply different values; rather, it shapes how individuals perceive trade-offs. The chapter also predicts that those with the EMM are more likely to update their views based on new economic information, while AMM users often rely on simplified cues, reinforcing existing misconceptions.

Chapter 7 investigates how mental models shape Americans’ attitudes toward globalization, focusing on trade and immigration against a backdrop of growing economic nationalism under both the Trump and Biden administrations. Using survey data and conjoint experiments, the chapter reveals that individuals who think like economists (i.e., high economic knowledge) view trade and immigration more favorably. To address the concentrated harms of globalization they prefer strategies such as unemployment benefits and retraining programs rather than protectionist measures. By contrast, those with Alternative Mental Models tend to support protectionist measures that promise immediate relief but undermine long-term welfare. Crucially, people aligned with the Economist Mental Model are more responsive to new economic information; when presented with evidence of net gains, they adjust their stance in favor of globalization, and vice versa. This responsiveness underscores that their support for free trade and immigration is not blind but rooted in systematic cost–benefit analysis.

Meta-analysis of previous VAR studies shows that QE multipliers can differ by a factor of 100. But it is unknown if this wide dispersion arises from the use of different QE measures or different VAR modelling approaches. This chapter examines this question

Chapter 4 investigates how mental models, particularly the Economist Mental Model (EMM), shape Italians’ support for globalization policies: EU membership, free trade, and immigration. Against a backdrop of economic stagnation and rising populism, the chapter shows that individuals with higher economic knowledge – those who think like economists – are significantly more likely to favor these welfare-enhancing policies. Notably, this holds even for “losers” of globalization in terms of lower income, lower education, or routine jobs, suggesting that economic reasoning can override short-term self-interest. The chapter also explores time preferences, finding that EMM adopters have lower subjective discount rates, making them more apt to weigh long-term gains over immediate costs. Additional tests confirm these findings are not driven by general education, highlighting the distinctive role of economic reasoning in shaping attitudes toward globalization.

This chapter focuses on the financial-market effects of QT. It analyses how government bond yields changed on QE and QT announcement dates and compare the effects of QT announcements with those of QE