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.


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.

Daniel R Hawes

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?


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


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?


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.

Alan Thiesen

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

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.



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)


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?


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)

F'rinstance, my mom won't shop at WalMart

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?

Jim Birch

From a reading of current cognitive psychology it seems patently obvious to me that the "rational economic actor" is clearly a religious fantasy, and so, a crazy basis for any economic theory. On the other hand, "animal spirits" explanations lack strong empirical verification. Can identity economics - and animal spirits in general - be converted from a narrative explanation into a solid testable mathematical model? How far away are we? Are there any good results already?


How does self-deception play into our conception of ourselves?


Do you think that the malleable nature of identity is enough to explain most individuals' differing attitudes towards the theft of physical and digital products?

How does your proposition that identity may be the most important factor affecting economic decisions apply to non-Western cultures where identity is defined collectively rather than individually?


Is economic identity primordial or constructed? By that I mean, is economic identity something that one is born with (like gender, ethnicity, or religion) that cannot be changed but is inherent in one's very essence. Alternatively, is economic identity a social construct where one's identity is created through experience, learning, and interaction with others.