Behavioral economics generally concerns itself with filling in the gaps or explaining the anomalies in traditional economic models. Much of this concerns what economists call “irrational” behavior. In a new book called Identity Economics, George A. Akerlof and Rachel E. Kranton discuss a compelling way of understanding irrational behavior: “People’s notions of what is proper, and what is forbidden, and for whom, are fundamental to how hard they work, and how they learn, spend, and save. Thus people’s identity–their conception of who they are, and of who they choose to be–may be the most important factor affecting their economic lives.”
While there are strong echoes in the book of earlier economics research (Gary Becker‘s research on information-based discrimination versus taste-based discrimination, e.g.), there is much here that is excitingly original. Moreover, readers who have become disgusted by the notion that all economists feel that free markets solve all problems will find comfort in Akerlof and Kranton’s analysis. They explain, for instance, why “it took a social movement and government intervention rather than a competitive marketplace to erode the discrimination against women in the United States,” and how identity is related to the economics of education, race and poverty.
Akerlof is a Nobel Laureate and the Koshland Professor of Economics at the University of California, Berkeley; Kranton is a professor of economics at Duke. They have agreed to take your questions on the subject of identity economics, so post them in the comments section below. As?always, we’ll publish their answers in short time.
Addendum: Akerlof and Kranton’s answers are here.
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How is your conception of identity, and whether something is “proper” or “forbidden”, distinct from the way social scientists conceptualize social norms?
Re #8, couldn’t one argue that one’s self-interest is, in fact, preserving one’s identity as opposed to what someone else would expect to be one’s (economic or practical) self-interest?
Take a seemingly trivial example, box tops for schools. You can pay an extra 80 cents for a box of name brand granola bars to get the 10 cent box top to give to your school. One could argue that this is against one’s self-interest because you could buy the cheaper granola bars and donate 10 to 79 cents to the school and both you and the school come out ahead.
But lots of people decide to be good sports and buy the name brand granola bars because it is socially valuable in terms of school and parental identity (we are people who help our school) and little Johnny isn’t the only kid not bringing in his baggie of box tops (he is a participant in the school culture).
At some level they have decided that identity is worth the 80 cents.
A very simple glance at the ideas in your book might lead to the sort of “self-esteem” education many in my generation were raised with in the 80s. In some sense, I don’t think self-esteem culture was totally off base; if you raise your children to believe they are smart and capable, that will become part of their identity and will create a magnetic draw around the influences in their life. Obviously, the culture may also create fear of failure and a sense of entitlement… How would you apply the ideas of Identity Economics to raising children?
I have read, but not confirmed, that a lot of the prejudice against gay actors in the tv/movie industry actually stems from gay casting directors who don’t think the actor can perform a straight role and less so from studio executives who doubt the marketability of such movies. Paradoxically, lesbian do not share the same problem from among their cohort.
Is there any actual evidence to suggest that an out actor/actress is detrimental to a movie’s financial success? How does this correlate with the actor’s professional success e.g. awards won. Also, how does this translate in other potentially high-profile careers like sports or the arts where it might be beneficial.
Paper or plastic? (or thinking outside the box…bring your own bag, which may poison you because bags are just mobile bacteria farms)
Which seemingly irrational economic habits are the most difficult to break.
1. How does the ability of institutions to shape identity impact the proper assessment of a corporation’s responsibilities to its workers? If the firm and the worker aren’t engaged in arms length negotiation over the terms of the workers contract, but instead the firm to some extent is able to shape the worker’s values, does that give the firm a heightened responsibility to its workers?
2. Does your work undermine the economic theory of politics? Does it suggest that values ought to be a more central part of public discourse?
I’m interested in the feedback loop that forms between identity and economics. How do you measure the effect of economic well-being on identity and vice versa?