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.
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. The book emerged from Akerlof and Kranton’s original articles on Identity Economics:
“Economics and Identity,” George Akerlof and Rachel Kranton, Quarterly Journal of Economics CVX (3), August 2000, pp. 715-753.
“Identity and Schooling: Some Lessons for the Economics of Education,” George Akerlof and Rachel Kranton, Journal of Economic Literature, 40 (4), December 2002, pp. 1167-1201.
“Identity and the Economics of Organizations,” George Akerlof and Rachel Kranton, Journal of Economic Perspectives, 19 (1), Winter 2005, pp. 9-32.
“Identity, Supervision, and Work Groups,” George Akerlof and Rachel Kranton, American Economic Review Papers and Proceedings 98 (2), May 2008, pp. 212-17.
Rachel Kranton is working on the implications of social identity for group bias, with co-authors in economics and psychology and neuroscience.
“Groupy and Non-Groupy Behavior: Deconstructing Bias in Social Preferences,” Rachel Kranton, Matthew Pease, Seth Sanders, and Scott Huettel, May 2016. NEW version. Online Appendix. For OLD versions, dating from 2013, see below.
“Exploring the Generalization Process from Past Behavior to Predicting Current Behavior,” Lasana Harris, Elizabeth Thompson, Victoria Lee, and Rachel Kranton, Journal of Behavioral Decision Making, June 2015.
“Identity Economics and the Brain: Uncovering Mechanisms of Social Conflct,” Scott Huettel and Rachel Kranton, PTRS Biological Sciences 5(367), March 2012, pp. 680-91.