IdentityEconomics:HowOurIdentitiesShapeOurWork,Wages,andWell-Being

IdentityEconomicsprovidesanimportantandcompellingnewwaytounderstandhumanbehavior,revealinghowouridentities--andnotjusteconomicincentives--influenceourdecisions.In1995,economistRachelKrantonwrotefutureNobelPrize-winnerGeorgeAkerlofaletterinsistingthathismostrecentpaperwaswrong.Identity,sheargued,wasthemissingelementthatwouldhelptoexplainwhypeople--facingthesameeconomiccircumstances--wouldmakedifferentchoices.Thiswasthebeginningofafourteen-yearcollaboration--andofIdentityEconomics.Theauthorsexplainhowourconceptionofwhoweareandwhowewanttobemayshapeoureconomiclivesmorethananyotherfactor,affectinghowhardwework,andhowwelearn,spend,andsave.Identityeconomicsisanewwaytounderstandpeople'sdecisions--atwork,atschool,andathome.Withit,wecanbetterappreciatewhyincentiveslikestockoptionsworkordon't;whysomeschoolssucceedandothersdon't;whysomecitiesandtownsdon'tinvestintheirfutures--andmuch,muchmore.IdentityEconomicsbridgesacriticalgapinthesocialsciences.Itbringsidentityandnormstoeconomics.People'snotionsofwhatisproper,andwhatisforbidden,andforwhom,arefundamentaltohowhardtheywork,andhowtheylearn,spend,andsave.Thuspeople'sidentity--theirconceptionofwhotheyare,andofwhotheychoosetobe--maybethemostimportantfactoraffectingtheireconomiclives.Andthelimitsplacedbysocietyonpeople'sidentitycanalsobecrucialdeterminantsoftheireconomicwell-being.