Identity Economics

George Akerlof and Rachel Kranton

Princeton University Press (2010)

Publisher's Description:

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.

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.

George A. Akerlof is the Koshland Professor of Economics at the University of California, Berkeley, and 2001 Nobel Laureate in Economics. Rachel E. Kranton is Professor of Economics at Duke University. Akerlof is the coauthor, with Robert Shiller, of Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.


"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

"[A]n important new book. . . . Professor Akerlof and Rachel Kranton have invented Identity Economics."--Daniel Finkelstein, The Times

"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

"[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

"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

"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

Return to Rachel Kranton's homepage

Contact information:

Rachel Kranton
Department of Economics
Duke University, Box 90097
213 Social Sciences Building
Durham, NC 27708-0097
Phone: (919) 660-1896
Fax: (919) 684-8974


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