Seminar 218, Psychology and Economics: Taha Choukhmane “Correlated Beliefs and Lifecycle Behavior”

Event details Date: Tuesday, September 1, 2026 Time: 2:00 PM to 3:30 PM Location: Evans Hall 648 Type: Lecture / Workshop About this event Abstract: Household subjective expectations are typically studied one domain at a time, but their effects on behavior depend on their joint distribution. For example, a household that is overly optimistic about its future earnings will tend to save too little. But if it is also too optimistic about its longevity, the two beliefs have opposing effects on saving, and the household might end up saving about the right amount. We measure the joint distribution of expectations using a new panel survey of U.S. adults covering ten economic domains, including asset returns, labor market outcomes, inflation, and life expectancy. Beliefs co-move along a small number of common factors, sort individuals into interpretable types that correlate with measures of psychological optimism, and, after correcting for measurement error, display substantial within-person persistence. We incorporate this belief structure into a lifecycle model of consumption, saving, portfolio choice, and housing: relative to a benchmark with equally dispersed but uncorrelated beliefs, we find the observed correlation structure attenuates the pass-through from any single expectation to behavior and reduces the average welfare cost of belief heterogeneity by almost one-fourth. Studying expectations domain by domain, as is standard in the literature, thus overstates their behavioral and welfare consequences. Our latest survey wave (currently being analyzed) includes LLM-led qualitative interviews to understand the mental models behind these correlated beliefs. Paper Link: [TBD] Official event details: https://events.berkeley.edu/econ/event/327084-seminar-218-psychology-and-economics-taha-choukhmane-