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Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being Hardcover – February 10, 2010

4.2 4.2 out of 5 stars 117 ratings

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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.


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Editorial Reviews

Review

"George A. Akerlof, Co-Winner of the 2001 Nobel Prize in Economics"

"One of Bloomberg News's (bloomberg.com/news) Top Thirty Business Books of the Year for 2010"

"Honorable Mention for the 2010 PROSE Award in Economics, Association of American Publishers"

"[Akerlof and Kranton] explore the links between our identities and the everyday decisions we make about earning and spending money. Their goal is to add a more personal touch to economics." ―
New York Times

"There is no question monetary incentives are important―indeed critical―but it is important also to consider other meaningful ways to motivate and engage work forces. In a recent book by George Akerlof and Rachel Kranton,
Identity Economics, the authors document how people in exceptional organizations work well because they identify with the values and the culture, not simply the financial rewards."---Al Gore and David Blood, Wall Street Journal

"An important new book. . . . Preserving our identity, obeying its rules, living by its norms is, Akerlof and Kranton argue, one of our central economic objectives. And our behaviour doesn’t make much sense unless the importance of identity is understood."
---Daniel Finkelstein, The Times

"
Identity Economics is a popular account of work that will already be familiar to economists who have read the authors' journal articles. It is admirably short, written in a clear, nontechnical style but without the condescending breeziness of many books aimed at the airport market. Nonspecialist readers will find a lot of insightful and well-informed analysis of how issues of identity have an impact on real economic problems."---Robert Sugden, Science

"The authors make a compelling case that the group with which individuals identify shapes their decisions about schooling, work, savings, investment, and retirement. This paradigm offers better ways of understanding the consequences of public policies and business practices. . . .
Identity Economics provides a new language and a useful apparatus to take measure of 'real people in real situations.'" ― Barron's

"Business managers, economists, policy makers, and school administrators will all gain fresh insights into similar enigmas that confront them if they bear the book's message in mind: identity matters." ―
ForeWord

"[A] lucid look at how social considerations carry economic consequences. . . . The authors use the word 'identity' as shorthand for the way people divide themselves into social groups, each of which--like high-school Jocks and Burnouts--has a sense of how to behave."
---James Pressley, Bloomberg News

"The essence of the book is to place social contexts at the heart of an individual's decision-making. Tastes vary with social context, and concepts such as identity and norms influence the outcome." ―
Mint

"This is a completely new idea, which, in essence, says that one effect of being in an increasingly liberal and affluent society is that aspects of identity that previously didn't seem to matter much to economists are consciously influencing our behaviour."
---Trevor Phillips, Prospect

"[Akerlof and Kranton] present the material in a very readable and entertaining way. Their findings are that economic behavior is governed by one's social category, by the norms of that social assignment, and by how one views one's identity in that social context." ―
Choice

"By the end of the book, my overwhelming feeling was that the authors had made a pretty robust case for why our profession should pay greater attention to the social structures that underpin our economic decisions. For this, they should be highly commended."
---Samuel Tombs, Business Economist

"
Identity Economics provides the broader, better vision that we need." ― New Economy

"The book provides a solid basis for a plethora of future research, especially in the field of behavioural economics. . . . Identity economics is a step forward, progressing economic theory and understanding a little further along the path from
Homo economicus to Homo sapiens."---David A. Savage, The Economic Record

"Akerlof is one of the most imaginative thinkers in neoclassical economics, and his earlier work on information economics essentially sparked off a revolution which dramatically changed the nature of the subject. Any work by him is worth pursuing."
---Priyodorshi Banerjee, Economic & Political Weekly

"
Identity Economics marks a very significant contribution to the ever-growing economic literature incorporating nonmonetary motives to explain behavior and as such it is highly recommended reading for social scientists."---Andreas P. Kyriacou, Public Choice

"This book is a must read for any social scientist whose interests lie in the intersection of economic analysis and real-world context and situations. While decidedly a trade book, the substantial list of references and strong foundations in the economics literature provide further reading for those who may be more mathematically inclined. Overall, the book was an interesting and informative read providing a framework for analysis not usually offered elsewhere."
---Gabriel R. Serna, Journal of Economic Issues

"By demonstrating the ways identity and social norms guide economic behavior, Akerlof and Kranton present a powerful challenge to conventional economics--and our everyday assumptions about human behavior." ―
World Book Industry

Review

"In the regular economic discourse of markets and taxes, we often forget about the forces that truly make a large difference in our lives. In Identity Economics we sit on an economic porch with Rachel Kranton and George Akerlof, observing what we care about most―our identity."―Dan Ariely, author of Predictably Irrational: The Hidden Forces That Shape Our Decisions

"In
Identity Economics, George Akerlof and Rachel Kranton team up to bring people and their passions into economic analysis. Moving away from conventional accounts, they propose a bold paradigm to explain why and how identity and social norms shape economic decision making. With verve and insight, the book transforms standard economic understandings of organizations, schools, gender segregation, and racial discrimination. This new enlightened economics opens up a bright future for serious collaboration between economists and sociologists."―Viviana A. Zelizer, author of The Purchase of Intimacy

"This intriguing book shows how much can be learned when you add the tools of economics to the other intellectual resources now available for thinking about the power of identity. George Akerlof and Rachel Kranton report the results of technical modeling without immersing the reader in the technicalities. The result is an accessible work of commendable clarity."
―Kwame Anthony Appiah, author of The Ethics of Identity

"
Identity Economics blends elements of psychology with traditional economic analysis. The writing is clear, interesting, and light on jargon. The interplay between theoretical predictions and concrete examples is particularly successful. It brings fascinating developments at the frontier of economics within reach of a wide audience."―H. Peyton Young, University of Oxford

"
Identity Economics is full of creative and interesting thoughts that will delight and intrigue those who read it. The writing is lucid and accessible with a minimum of standard economics jargon, making it possible for the book to have a wide readership across the social sciences."―Timothy Besley, London School of Economics and Political Science

Product details

  • Publisher ‏ : ‎ Princeton University Press; American First edition (February 10, 2010)
  • Language ‏ : ‎ English
  • Hardcover ‏ : ‎ 192 pages
  • ISBN-10 ‏ : ‎ 0691146489
  • ISBN-13 ‏ : ‎ 978-0691146485
  • Item Weight ‏ : ‎ 15.2 ounces
  • Dimensions ‏ : ‎ 6.5 x 0.75 x 9.75 inches
  • Customer Reviews:
    4.2 4.2 out of 5 stars 117 ratings

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Customer reviews

4.2 out of 5 stars
117 global ratings

Customers say

Customers find the pacing easy, insightful, and succinct. They also describe the book as interesting and approachable.

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8 customers mention "Pacing"6 positive2 negative

Customers find the pacing of the book easy, insightful, and clear. They also say it makes its case convincingly and is succinct but deep.

"...Well, my skepticism turned out to be misplaced. The book is well-written, clear, and makes its case quite convincingly...." Read more

"Really well-written and easy to understand...." Read more

"...The authors sound pompous and fail to engage the reader. I could not wait to finish this book...." Read more

"...An easy and insightful read." Read more

5 customers mention "Readability"5 positive0 negative

Customers find the book very interesting and approachable. They say the topics are incredibly interesting.

"...On top of that, the topics in this book are incredibly interesting and are things that are very important to understand how people behave today, and..." Read more

"...It was a good read and explained very well why people act in certain ways. I felt that it could have gone more in to detail, though...." Read more

"Very interesting read, although a bit shallow. Is like an invitation to follow Akerlof's further scientific and academic work. Highly recommended." Read more

"Very readable and approachable book. It so nice that Economics is beginning to see the effects of culture in their work. Great read." Read more

Top reviews from the United States

Reviewed in the United States on January 21, 2012
I must admit, even though I'm definitely an admirer of Akerlof's work, I was fairly skeptical of this book going into it. I figured it was worth the quick read. Well, my skepticism turned out to be misplaced. The book is well-written, clear, and makes its case quite convincingly. After reading it, it was difficult not to concede that mainstream economics needs to put at least some more thought into assessing the role of identity in people's decisions. The book does a nice job of explaining how identity is different from other more common economic theories of people's behavior (asymmetric information, repeated games of cooperation, Becker-style tastes in the utility function), and how it is capable of capturing many important and difficult-to-explain situations that are observed in the real world. Hopefully, the profession will take the book and its suggestions seriously and push research in that direction.
3 people found this helpful
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Reviewed in the United States on April 19, 2010
Economics has been going through an exciting transition. It was once known as the emperor of the social sciences back when the hyper-rational school of neoclassical economics was ascendant. Then psychologists and other more empirically-minded social scientists began to look at how real people make their choices and they found that, surprise, surprise, the emperor of the social sciences had no clothes.

But economists seem to have taken this criticism seriously and economists are developing new, more general tools based on game theory. They are also shameless ripping off the ideas of other disciplines. Economists are better with mathematical tools, game theory, and the (still sound) core of rational choice theory. These tools are letting them colonize other social sciences once again, and this time they will not be so easy to fight off.

That is what happens in this book. Neoclassical economics does not have much to say about how people form their preferences, nor did it have a vocabulary to discuss how people are socialized. That is changing with identity economics. The gist of identity economics is explained in a story that Akerlof and Kranton tell about children on a carousel. The toddler ride on their parents laps. The four and five year old children ride alone and wave to their parents on the sidelines. These children had a sense of identity which told them they were older and did not need to ride with their parents. They took great pleasure in riding alone, unlike the babies. The next older batch of kids were more daring. They'd switch positions, ride one-handed and no-handed, and find other ways to make the ride more exciting.

The thirteen year olds were the most interesting. They genuinely enjoyed the carousel but a part of them - their identity - told them they were too old. Carousels are for little kids. So they rode but pretended to be bored and indifferent. Eventually the cognitive dissonance got to be too much and they'd simply move on to something else. They show the key point: we have preferences for what we subjectively like, but we also have preferences based on our chosen identity. Sometimes they are in conflict. Think of the intellectual who reads "chick lit" or the Christian who listens to secular music.

One of the most interesting applications is for work effort. A firm is a little bit like a commune in that it only succeeds if everyone works hard for the common good. That means that firms suffer from the free rider problem because each worker has an incentive to shirk. There are a lot of market solutions but they tend to backfire. You can use monitors, but monitors only have an incentive to do a good job if they are the residual claim holder who gets the profits. Otherwise doing a good job as a manager won't benefit you, so you run into the "who will monitor the monitors" problem. You can try to pay people based on output, but that can't be easily quantified, so people will game the system to increase their performance in the things that are measured but slack off in the things that are unmeasured. Moreover, workers worry that if they do well, the bonus will be reduced. So workers punish fellow employees who work too hard with social scorn and ostracism and even sabotage. Instead what you get is a situation where people create workplace identities, which in turn sets the norms for work effort. Firms would be well-advised to put their energy into fostering high moral and cohesive workgroup identities than into trying to create incentive schemes or strict monitoring.

The authors then go on to push their model even further, into the realm of race and gender. Overall the walk a delicate balancing act. On one hand, they point out that blacks have identities that lead to creating an "oppositional culture" against whites, and punish good students for "acting white". On the other hand, they do not want to let whites "off the hook" so they take pains to frame this in a way that is consistent with the view that racism and other structural problems lead to this identity. For example, they approvingly cite William Julius Wilson theory about the loss of manufacturing jobs hurting the black community and leading to unmarriageable men, but this has not held up (see 
Poverty and Discrimination  by Kevin Lang and  The Marriage Problem: How Our Culture Has Weakened Families  by James Q. Wilson). In another section they approvingly cite the research on stereotype threat, but blacks in college actually have grades that are even lower than what you would expect from their SAT's (see  No Excuses  by Abigail Thernstrom). In another unpublished study, it turned out that the stereotype threat is created by a publication bias - studies of a stereotype threat that do not produce a significant result are not published, so their are many unpublished studies on the stereotype threat.

I think that also leads to my greatest criticism of the book, which is that its view of identities is somewhat incoherent. In their treatment of identities and gender the authors implicitly champion the blank slate view of human nature, which holds that people are infinitely malleable. We could raise boys to be nurturers who love babies and women to be aggressive and competitive. That view is simply wrong; there are biological constraints on our identities. Women are more nurturing than men in every known human society, regardless of how primitive. If nurturing were socially constructed then you'd expect some isolated tribe in Papua New Guinea to have nurturing men. (See
The Blank Slate by Steven Pinker who a good take down of the blank slate theory of human nature). One of the main reasons why women choose different jobs than men is because "pink collar" jobs are relatively friendly for leaving the workforce on an extended basis. It is easy for teachers to exit and enter the workforce, but engineers will have to learn many new skills as computers and technology change.

On the other hand, when the subject is racial identities, the identities no longer seem to be social constructs except in the weak sense that blacks chose their identities in response to the identities chosen by whites. It ignores the fact that there is a lot of wriggle room in human nature. In some parallel universe the 1960's never happened and out of wedlock childbirths in the black community didn't increase from 10% to 65%. The upshot is that this book ends out being a much weaker champion for identity economics than it could have been. I'd like to see the authors show that identities are their own engines of human destiny, and more than mere structural explanations for things we already know. My conclusion is that I found the book more valuable than the authors themselves!
17 people found this helpful
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Reviewed in the United States on May 6, 2018
Identity Matters since its affects all aspects of our lives.

Standard economic models based on perfect information and competition neglect powerful identity forces which explain why often actors don't maximize output.

Why do poor and minority children don't tend to obtain higher high school scores?

Why do women earn less money than men in same type of jobs and occupations?

Read the book. Learn and apply its lessons to make the world a better and more just place for all.
Reviewed in the United States on June 26, 2017
Really well-written and easy to understand. On top of that, the topics in this book are incredibly interesting and are things that are very important to understand how people behave today, and even how they will behave in the future.
2 people found this helpful
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Reviewed in the United States on August 27, 2011
This book is correct in what it is proposing, but it comes across as an article that was lengthened and published as a book to try and make more money out of the concept.

Disclosure: I am earning my Masters in Health Administration as well as my Masters in Business Administration. I read books on behavioral economics, business, strategy, and crowds.

Content: The authors did not find good examples for their argument. Their arguments are loosely built and poorly reinforced. I have read other books (like
Switch: How to Change Things When Change Is Hard ) that bring up some of the main concepts of this book but with better arguments and in a more enjoyable and convincing manner.

Writing style: This book was written like an article -- very, very dry. The authors sound pompous and fail to engage the reader. I could not wait to finish this book.

Overall recommendation: I really wish I could have given this book less than 3 stars, but I had to give some credit where credit is due. Identity economics is real, and the authors should get credit for recognizing and promoting it, but I suggest reading a different book if you want to know more about it.
6 people found this helpful
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Reviewed in the United States on October 22, 2012
The authors identify this field as nascent and so the book contains only hints of how far this approach can be taken. I don't think it is over stating the case to say America and much of the world is in an identity economics recession. The kind of validation the book describes as on par with monetary compensation has become harder and harder to come by. Once one accepts that there are other purposes to our economy besides maximizing individual life style then most of traditional economics falls apart. The book barely scratches the surface on the possibility that identity utility function, not purchasing power, is the main driver of our economy.
3 people found this helpful
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Reviewed in the United States on August 4, 2020
Gave as a gift, they still talk about what a great book it is.
Reviewed in the United States on December 20, 2015
Brilliant. Akerlof and Kranton convincingly challenge the economic assumption "De Gustibus Non Disputandem" (per Gary Becker) --- that tastes are a given, outside the province of economics. An easy and insightful read.
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Top reviews from other countries

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Yiqing Bao
4.0 out of 5 stars A classic and convincing read for behavioral economics
Reviewed in Germany on August 19, 2021
A convincing read to take human behaviors into accounts in every aspect of life: macro/micro-economy, workplace, household life, education, race & gender, etc. A refreshing perspective by considering qualitative (unpredictable) factors in the model versus traditional finance and economy theories (pure numerical, quantitative factors).
greg
2.0 out of 5 stars actually quite boring
Reviewed in Canada on November 16, 2017
Found this tough to read, actually quite boring
Veronica C
5.0 out of 5 stars New economic vision
Reviewed in the United Kingdom on August 9, 2014
A good book that guides the academic thought into something that seems necessary: the inclusion of identity into economics. Akerlof and Kranton well explain its relevance and draw a line from where to start for the development of a new economic vision.
Philippe Korda
3.0 out of 5 stars l'économie de l'identité : un nouveau terrain de réflexion
Reviewed in France on May 4, 2014
Prix Nobel d'Economie, George Akerlof est présumé savoir de quoi il parle. Son dernier livre développe une thèse très intéressante au sujet de la façon dont l'identité façonne les comportements économiques, en fonction des normes et valeurs du groupe social auquel l'individu se sent appartenir.
Selon cette analyse, on ne peut pas comprendre les comportements apparemment irrationnels de certains individus - mauvais élèves à l'école, collaborateurs critiquant constamment leur entreprise etc. - si on ne cherche pas à comprendre ce qui définit l'identité de ces individus et les normes de comportement que ceux-ci se sentent tenus de respecter.
L'idée est pertinente. Elle peut sembler classique dans les champs de la sociologie et de la psychologie sociale mais elle est nouvelle dans celui de l'économie.
Le livre souffre cependant de quelques faiblesses, notamment un côté un peu daté dans le choix des exemples et des références, et une certaine rigidité théorique qui rend les applications pratiques peu convaincantes. Il faut donc voir maintenant si et comment ce sujet est repris et approfondi par d'autres chercheurs.
3 people found this helpful
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Kris Als
3.0 out of 5 stars More useful for instrumentalistic economists than identity experts (I would imagine)
Reviewed in the United Kingdom on January 22, 2018
Wasn't a big fan. This is just another example of economists surprised by the value of sociological perspectives on their field. Very few surprises for someone who deals with identity in this piece.
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