How identity influences the economic choices we make
Identity Economics provides an important and compelling new way to
understand human behavior, revealing how our identities--and not just
economic incentives--influence our decisions. In 1995, economist Rachel
Kranton wrote future Nobel Prize-winner George Akerlof a letter
insisting that his most recent paper was wrong. Identity, she argued,
was the missing element that would help to explain why people--facing
the same economic circumstances--would make different choices. This was
the beginning of a fourteen-year collaboration--and of Identity
Economics.
The authors explain how our conception of who we are and who we want to
be may shape our economic lives more than any other factor, affecting
how hard we work, and how we learn, spend, and save. Identity economics
is a new way to understand people's decisions--at work, at school, and
at home. With it, we can better appreciate why incentives like stock
options work or don't; why some schools succeed and others don't; why
some cities and towns don't invest in their futures--and much, much
more.
Identity Economics bridges a critical gap in the social sciences. It
brings identity and norms to economics. 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. And
the limits placed by society on people's identity can also be crucial
determinants of their economic well-being.
