New Horizons in Institutional and Evolutionary Economics series
Chapter 7: Identity Dynamics and Economic Evolution
7.1 ECONOMIC EVOLUTION REQUIRES IDENTITY DYNAMICS The concept of identity is central to cultural studies and much of the post-modern humanities where it connects a person’s self-image to group affiliations, thus expressing the ‘personal political’ of identity politics. Examples include gender, racial, class, sexual, cultural and religious identity in the prime instance, but extend outward to encompass identity in terms of community, nation, and other social aggregates with respect to which an individual ‘identifies’. Identity is also a prime concern of personal and social psychology (sense of self), philosophy (selfhood) and anthropology and ethnography (sense of place and group affiliation). But until very recently, almost the only part of the non-physical sciences (cf. Breger 1974, Greenfield 2008) that did not have serious interest in identity was economics. The concept of identity has recently entered microeconomic theory through the work of Akerlof and Kranton (2000, 2005, 2010), Davis (1995, 2003, 2007), Kirman and Teschl (2004), Livet (2006), and Sen (1985, 1999b, 2004). Each makes a different argument, yet all broadly converge on identity as a useful additional concept in modelling choice in socially framed situations, focussing on particular identities as additional constraints over choice. Identity thus enters economics as an additional parameter that constrains individual choice as a function of each individual’s particular identity endowment. In this way, identity is made a further argument in the agent’s utility function. Let us call this choice-theoretic approach equilibrium identity statics (Akerlof and Kranton 2000, 2010). Unlike the cultural studies and other approaches that...
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