Identity Economics

In standard economic models, individuals maximize their self-interest. In the identity economics model described below by George Akerlof ond Rachel Kranton, identities and norms are basic motivations. They claim that " Identity Economics provides the broader, better vision that we need":

Identity Economics, by George Akerlof and Rachel Kranton, Commentary, Project Syndicate: A great strength of economics is its ability to examine how decisions are made from the point of view of decision makers. For example, economics can explain in this way why consumers buy what they do. It also offers a perspective on why employees work for some employers and not others, why they work as hard as they do, and, indeed, why they go to work at all.

But in most economic analysis, the decision makers’ point of view is quite narrow. It starts with what people like and don’t like. People may have a taste for oranges or bananas, or a preference for enjoying life today instead of saving for the future. They then decide what to buy or how much to save, given prevailing prices, interest rates, and their own income. Economists have included in such analysis that people interact with others, but they have largely treated such social interactions in a mechanical fashion, as if they were commodities. ...[continue reading]...