Racial attention deficit.

Despite efforts toward equity in organizations and institutions, minority members report that they are often ignored, their contributions undervalued. Against this backdrop, we conduct a large-sample, multiyear experimental study to investigate patterns of attention. The findings provide causal evidence of a racial attention deficit: Even when in their best interest, White Americans pay less attention to Black peers. In a baseline study, we assign an incentivized puzzle to participants and examine their willingness to follow the example of their White and Black peers. White participants presume that Black peers are less competent­and fail to learn from their choices. We then test two interventions: Providing information about past accomplishments reduces the disparity in evaluations of Black peers, but the racial attention deficit persists. When Whites can witness the accomplishments of Black peers, rather than being told about them, the racial attention deficit subsides. We suggest that such a deficit can explain racial gaps documented in science, education, health, and law.

Ethnic diversity deflates price bubbles.

Markets are central to modern society, so their failures can be devastating. Here, we examine a prominent failure: price bubbles. Bubbles emerge when traders err collectively in pricing, causing misfit between market prices and the true values of assets. The causes of such collective errors remain elusive. We propose that bubbles are affected by ethnic homogeneity in the market and can be thwarted by diversity. In homogenous markets, traders place undue confidence in the decisions of others. Less likely to scrutinize others' decisions, traders are more likely to accept prices that deviate from true values. To test this, we constructed experimental markets in Southeast Asia and North America, where participants traded stocks to earn money. We randomly assigned participants to ethnically homogeneous or diverse markets. We find a marked difference: Across markets and locations, market prices fit true values 58% better in diverse markets. The effect is similar across sites, despite sizeable differences in culture and ethnic composition. Specifically, in homogenous markets, overpricing is higher as traders are more likely to accept speculative prices. Their pricing errors are more correlated than in diverse markets. In addition, when bubbles burst, homogenous markets crash more severely. The findings suggest that price bubbles arise not only from individual errors or financial conditions, but also from the social context of decision making. The evidence may inform public discussion on ethnic diversity: it may be beneficial not only for providing variety in perspectives and skills, but also because diversity facilitates friction that enhances deliberation and upends conformity.