Is identity the missing motivation of economics? UC Berkeley's George Akerlof and University of Maryland's Rachel Kranton certainly think so. In a recent London lecture at the LSE, Akerlof explains how this interest arose:
In the spring of 1996 Rachel wrote me a letter which said that my previous paper, on Social Distance, in Econometrica, had missed the concept of identity. She also said that concerns regarding identity were a serious omission from economic theory.
Initially I was not pleased to receive this letter, which said that my previous paper was all wrong. I also thought that Rachel was in error. I thought that identity was just an aspect of people’s tastes. As a result, I also thought that standard utility theory already took full account of it. But after we talked it over for a great deal of time we discovered that identity really does have a meaning. We decided also that it is a major factor missing from current economics.
Rachel and I have now written four lengthy papers on this subject, and now we are trying to summarize it in a book. ...this lecture is a summary of where we have gotten to date on that book.
Of course, the fourth of these papers was Akerlof's January 2007 AEA Presidential Address, which has already attracted some econoblog commentary. But in his recent Stamp lecture Akerlof provides the wider argument, spanning all four papers. Both the Powerpoint (PDF) and transcript (PDF) from Akerlof's Stamp Lecture on 'Economics and Identity', delivered at the London School of Economics on April 25, are now available. This body of work is certainly starting to influence economic debates. Their first article, published in the QJE in 2000, has already been cited by over 100 economic papers.
Many of us would agree that the neoclassical model of human behaviour is incomplete. To what extent does the Akerlof-Kranton thesis help complete the picture? I'm not yet sure. But for those looking for a little economic theory to stimulate their neurons on a holiday Monday, reading the four papers below (which will form the basis of their forthcoming book) may be time well spent. I'm certainly taking them to read on my summer break.
* Economics and Identity (PDF), Quarterly Journal of Economics CXV(3), August 2000, pp. 715-733.
* Identity and Schooling: Some Lessons for the Economics of Education (PDF), Journal of Economic Literature, 40(4), December 2002, pp.1167-1201.
* Identity and the Economics of Organizations (PDF), Journal of Economic Perspectives, Fall/Winter 2004; a longer version with the modelling is available here (PDF).
* The Missing Motivation in Macroeconomics (PDF), AEA Presidential Address, January 2007