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Tuesday, May 04, 2010

Identity Economics and Status Anxiety

Every now and again you read a book that makes you see the world differently.  A few weeks back, I read Akerlof and Kranton’s Identity Economics, and it had that effect on me.  In this book, the authors reject the assumption of traditional economics that tastes and preferences are independent characteristics unrelated to social context.  Instead, they argue that social categories, behavior norms, and a person’s sense of belonging interact to create what they call “identity utility” (or disutility). 


For example, a simple welfarist account of a worker’s motivations goes something like this:  We work in exchange for wages, and the more we get paid, the harder we’ll work.  What Identity Economics adds is the insight that this simple utility function is affected also by the extent to which you see your job as fulfilling to their sense of identity.  If you’re a “company man”—someone who sees their job as an extension of the self—you’ll likely work much harder than a basic wage/effort calculus would predict.  By contrast, if you see your job as soul-sucking and inconsistent with your identity, you’ll likely work only hard enough not to get fired (and may even engage in sabotage to stick it to your hated employer).


This very brief summary can’t do justice to the argument of the book, but it at least sets up a question I was left with after reading Identity Economics.  I think it’s true that social categories, behavior norms, and our sense of identity impact the utility function in underappreciated ways, but this doesn’t explain why this happens.  I think the answer to this question lies in the idea of status (and a related idea, Status Anxiety, the title of another book I loved, by Alain de Botton), and I explain this point more (and suggest that the link to status shows how law fits into the picture) below the fold.

To take another quick example from Identity Economics, men tend to experience identity disutility when they do what has been traditionally regarded as “women’s work” (e.g., nursing), while women tend to experience identity disutility when they do what has been traditionally regarded as “men’s work” (e.g., construction, mining).  Much of this comes from outside the workplace.  Constantly being met with skepticism about your choice of work is irritating, and this is costly to the worker. 


But much of this identity disutility comes from within the workplace as well.   Co-workers are often hugely resistant to gender integration, and take this out on co-workers from the non-traditional genders (Identity Economics has some harrowing stories about how this is true even relatively recently at a Bay Area law firm).  Why would workers see gender integration as threatening to their identities?  Why not, instead, see it merely as a welcome change that will increase the pool of talented applicants? 


The answer to this question, I think, lies at the nexus of identity and status anxiety.  Identity tells us who we are by fitting us into relevant social categories, but it is also a tool for making us feel good about ourselves to the extent that a given identity places us in the upper echelons of a given status hierarchy.  (And here I owe a hat tip to de Botton and his book, Status Anxiety, which is a great exposition of the dominant role status—and worry about status—plays in our understanding of our place in the world.)  Gender integration in the workplace may well be perceived as making someone who traditionally thought of himself as belonging to a privileged category (male) no longer feel so distinctive—the marker of his identity is being demoted to a relatively lower status, because his job is no longer a special province for members of his gender.


If this sounds like a somewhat familiar idea, I think it is.  Gary Becker introduced the idea of a “taste” for discrimination some years ago in an attempt to explain the prevalence of discrimination even when such behavior seems patently irrational.  Identity economics and status anxiety help to explain why some (favored) people may have such a taste for discrimination within caste systems.  Such systems depend on everyone having their identity anchored to a given salient category (race, class, etc.), and for those favored by the given hierarchy, keeping others down enhances their own status and brings them identity utility by maintaining the privileged status of the group to which they belong. (It should go without saying that this is pretty obviously morally objectionable behavior, so to be 100% clear, I'm seeking here only to explain, not to justify.)


Finally, introducing status (and status anxiety) into the equation shows how law fits into the picture.  Since I apparently can’t write three posts without talking about Order Without Law (which I happen to be re-reading at present, in case that wasn’t painfully obvious), here goes again.  Ellickson poses this puzzle:  why do traditionalist ranchers in Shasta County resist closed-range ordinances when it still leaves those ranchers with plenty of land to graze on?  The ranchers explain their resistance in terms of concern for higher insurance premiums and liability to motorists, but neither of these are actually affected by range closure.  Instead, Ellickson shows that what is really objectionable to these ranchers is that they think of the open range as part of their identity and way of life, so that a law closing part of the range is a huge symbolic state-sanctioned slap in the face—an indication by the state that it dismisses the importance of the open range—even if the closures don’t exact any more tangible or traditional costs.


There are lots of other examples.  Property rights advocates cheered state legislatures’ Kelo-driven restrictions on eminent domain, even when those laws were effectively toothless; and interest groups spend lobby heavily (and expensively) for state recognition or public monuments that will not bring them any monetary value.  Identity economics and status anxiety explain why, at least to an extent.  We (or at least most of us) want the state to prioritize the social categories to which we anchor our identities, because government-sanctioned approval of those categories gives us a uniquely strong infusion of identity utility, instilling a sense of status superiority over other groups.

Posted by Dave_Fagundes on May 4, 2010 at 08:46 PM in Books | Permalink


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This could conceivably be my fault for unclear writing, but I think we're simply speaking past each other at this point. I understand that it's commonplace that there are individual-level differences in the utility people extract from given jobs. The contribution of the book, at least as I understand it, is that we typically fail to account for a particular kind of utility (identity utility) when making these assessments.

But yes, at this point it's probably better that you read the book. I'm sure the authors do a better job of explaining the point that I have.

Posted by: Dave | May 5, 2010 1:17:07 PM

Dave, your description of modern consumer theory is wrong. It is completely standard to include person-level characteristics into utility functions. So, people routinely model women/older workers/blacks/southerners/religious people as having different utilities from different jobs, products, places to live, etc., and then study those differences empirically. But I realize you can't tell a lot about the book in a blog comment. I'll check out the book, thanks for flagging it.

Posted by: lawanon | May 5, 2010 1:04:46 PM

Fair enough, my explanation of the basic A&K thesis in the first two paragraphs of the original post was just a cursory summary of an entire book, so it may not be possible to do this well. Here's another example:

Identity utility is premised on the idea that there are certain stable social categories that we prize, and that we draw utility from fitting into those categories (or, contrariwise, disutility when we don't fit in).

How does this change matters from what we'd otherwise predict? Consider the male nurse (an example shamelessly cribbed from A&K's chapter on gender). Traditional economics would say a man thinking about whether to be a nurse would add up the benefits of the job (perks, satisfaction from helping others, wages, etc.), compare them to the job's drawbacks (bad hours, it may be gross, etc.) and conclude based on comparing the two whether it's worth taking. IE seeks to add another wrinkle to this: the male nurse will also bear costs associated with doing what is traditionally considered "women's work", because there is disutility in not fitting into traditional social norms. This may not be the case if, e.g., the male nurse does not consider maleness to be a relevant category in constructing his sense of self (unlikely), or if he is a rebel who likes upsetting traditional social norms.

Does this change the basic idea that utility calculations determine the choices we make? Nope, but it's not meant to be a critique of economic analysis in that very foundational sense. What it does do, though, is provide a new and underappreciated input when thinking about how to calculate utility.

Posted by: Dave | May 5, 2010 11:38:24 AM

Dave, I truly don't understand what it means that "jobs interact with our senses of self in ways that generate dis/utility." In standard consumer theory, each employee has a dis/utility for a job; if he takes the job, he has that dis/utility; if he doesn't take the job, his dis/utility of that job is zero. How is this different from your "jobs interact with senses generating dis/utility"? Also, does the ID theory generate any predictions that are different from typical consumer theory predictions? I just don't any such hypothesis-generating differences.

Posted by: lawanon | May 5, 2010 3:15:49 AM

Dear anons,

#1: I saw that note somewhere and have always been meaning to read it--thanks for the tip.

#2: If you think the ID econ argument is trivial, A&K do a better job of explaining why it's not in their book. Briefly, the idea is not that there are intangibles that need to be accounted for in pay (titles, unpleasant work), but that jobs interact with our senses of self in ways that generate dis/utility. The latter point seems like a new way to complicate--though by no means to abandon--standard welfarist approaches. My status twist on this was an attempt to answer a why question; the book, IMO, begs the question why certain statuses are coveted, or why we cling to certain social categories when it seems irrational. My answer is that identity's value is often, perhaps always, wrapped up in social status, which explains our relative valuation of it.


Posted by: Dave | May 5, 2010 1:53:07 AM

I don't see how this is new or very controversial. It is well-known that employees are compensated both in cash and in kind. Giving someone a fancy status ("vice-president" title, corner office, a medal) is a well-known form of compensation. It is also well-known that employees have to be compensated for the unpleasantries of work, whether those unpleasantries come from physical dangers or having to perform embarrassing or emotionally unappealing tasks. None of the stuff you mentioned undermines mainstream modern consumer theory or price theory.

Posted by: lawanon | May 4, 2010 10:09:52 PM

You might be interested in this Note, particularly from the 11th page on, since it concerns your general field and engages this general literature.


Posted by: anon | May 4, 2010 9:34:05 PM

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