Bring Your Questions for the “Identity Economists”

Identity Economics

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.

COMMENTS: 32

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  1. Bob says:

    Please address the US’ historical approach to meritocracy and its effect when a society ignores the necessary skills required to survive and thrive.

    In other words; are we not creating a permanent underclass if we ignore the value of competing?

    Thank you in advance.

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  2. Daniel R Hawes says:

    Hi,
    I only just learned about the existence of this book, but I am fairly familiar with earlier research by G.A and R.K.
    It is my opinion that the aim of an economic model of identity should be to capture identity as a context-specific, multi-dimensional and dynamic element. To my knowledge, the classic Akerlof and Kranton identity model treats identity as an exogenously determined parameter. Is there anything in the book that expands on that earlier model?
    Also: In the light of neuroscience based economics research, as well as personality neuroscience, do you think that identity economics might have become a dead-end?
    Thanks,
    Daniel

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  3. Ray says:

    Well, the most obvious question would be what?s the main argument in “Identity Economics”.

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  4. Aaron says:

    From your research, is there any difference in the career success between people who often speak up (both good and bad) and those who choose not to rock the boat? Are managers/leaders/those in power impressed more by volatility or consistency?

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  5. nobody.really says:

    Have the authors read Mary Schweitzer’s “Custom and Contract” (1987)? The colonial period laid the foundations of the industrial revolution. Schweitzer explores how social norms governing age, gender and households flexed, but did not break, in the face of growing incentives to increase productivity in the household, the main unit of production. The book provides a microcosmic refutation of the claims of market fundamentalists that market incentives conquor all.

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  6. Alan Thiesen says:

    The irrational behavior of economists

    In my casual reading of economics, I get the impression that some influential economists believe some seemingly goofy things. Here are three examples I have come across.

    1. Asset bubbles do not exist. (a corollary of the efficient-market hypothesis)

    “I don’t know what a credit bubble means. I don’t even know what a bubble means. These words have become popular. I don’t think they have any meaning.” — Eugene Fama

    2. Drug addiction is rational. See http://www.bus.ucf.edu/sgerking/Smoking_papers/Gary_S_Becker_1988_JPE.pdf.

    3. Tax cuts don’t matter (Ricardian equivalence, as explained by Robert Barro and others)

    If you get a tax cut, rather than spending it, you will save and invest the money so that you or your heirs will be able to pay inevitably higher taxes later.

    Could it be that some economists hold irrational beliefs because of blind faith in the methodology of their field? I have the impression that some economists come up with elegant mathematical models and do not take sufficient care to see if their models correspond to economic reality.

    I do not suspect you of making this error. I recall that Paul Krugman wrote “Akerlof’s market for lemons had virtually no explicit math in its main exposition; yet it was transformative in its insight.”

    My apologies if I have misstated any of the theories above; I am not an economist.

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  7. frankenduf says:

    what do you make of Marx’s concept of class identity?- do you think that class identity is more conducive to democracy (rule of the many) than the atomistic identity model of the free market is? (ie. does atomistic identity tend more toward oligarchy of a powerful few, which come to dominate the market)

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  8. JonathanF says:

    I first came across this concept in Chip and Dan Heath’s book “Made to Stick”, where they note that an appeal to identity can sometimes trump self-interest , using politics as one example (188-189). Does your book give any indication of which factors lead to situations where people seem to base decisions more on identity than self-interest? E.g., type of decision? Age? Gender? Cultural group?

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