The contemporary discipline of identity economics With the publication of âEconomics and Identityâ in the Quarterly Journal of Economics in 2000, followed by the book Identity Economics in 2010, a new way of thinking about homo economicus (human economic) has emerged (Akerlof and Kranton, 2000; Akerlof and Kranton, 2010). In the introduction to their book, the authors Akerlof and Kranton attempted to place their thought processes and ideas within the framework of research in economics. As they point out, âModern economics follows Adam Smith’s eighteenth-century attempt to transform moral philosophy into a social science designed to create a good society. Smith enlisted all human passions and social institutions in this effort â(Akerlof & Kranton, 2010). They add, âFairly recently, behavioral economics has introduced cognitive biases and other psychological discoveries. Identity economics, in turn, introduces a social context – with a new economic man and woman who look like real people in real life situations â(Akerlof & Kranton, 2010). Identity economics can be described as the branch of behavioral economics that suggests that human beings make economic decisions not only on the basis of monetary incentives, but also as responses to their identity needs. In other words, identity economics postulates that a person’s sense of self or identity affects economic outcomes. Interestingly, Gandhi would have approved of any study focused on “building a good society”; he would have wholeheartedly supported engagement with “human passions and social institutions”. He would have hesitated a bit about âreal people in real situationsâ. Without disagreeing with the need to have a solid foundation in the real world, the world of ideals never stays far from the Mahatma, and it would fall back on Saint Matthew and Saint Mark to push us towards, at a minimum, aspire to them. ideals posed by Christ, the âgreatest economist of his timeâ (Parel, HS, 2009; CW 1999, v. 15, p. 275).
Traditional economics views individuals as selfishly preoccupied with their own individual “uses”. Rather than oppose utilitarianism head-on, Akerlof and Kranton simply sidestep simplistic positions by arguing that questions of âidentity and normâ are rooted in the utility functions that economic agents are supposed to have. They note: ‘. . . the behavior of individuals depends on who people think they are â(Akerlof & Kranton, 2010). The parallel this idea has with Gandhi’s thought is revealing. The Mahatma has repeatedly argued that the behavior of rich people could and would change if they saw themselves not as owners of wealth, but as custodians of wealth (CW, 1999, v. 50, p. 21) . Identity and standards are inextricably linked. According to political scientist Jon Elster, standards are the âglue of societyâ (Akerlof and Kranton, 2010).
Gandhi was concerned with how the glue held together the members of his various ashrams, who had to adhere to explicitly stated standards (CW, 1999, v. 15, pp. 165-175). On a larger scale, he was concerned about the standards needed to hold Indian compatriots together, be they Hindus, Muslims or untouchables (Sheean, 2005). Discussing Gandhi’s role as inspiration for modern environmentalists, Ramachandra Guha focuses on Gandhi’s emphasis on the negative impact of unbridled consumption (Guha, 2018). I would say that the doctrine of guardianship has an equal if not more important contribution to make in arguments dealing with the natural environment. One of the questions that comes up over and over again when talking about the economics of environmentalism concerns the difficulty of protecting a natural resource (a forest or a river or a lake) that does not belong to anyone. This is called the tragedy of the commons. Gandhi’s response would be that dharma or the pursuit of virtue would show a way out. Nobel laureate Elinor Ostrom makes a similar case when she argues that the âstandardsâ adopted by communities can often ensure that the tragedy of the commons does not occur. âStandardsâ, as adopted not only by individuals but as collectively subscribed by groups of individuals, such as the inmates of Gandhi’s ashrams, would have been welcomed by Gandhi. The oft-cited problem of free riders, when an individual or a small group of individuals tries to escape the costs borne by the community as a whole, is in fact solved, as they do not want their identity as good citizens and their identity. righteous members of their communities are assaulted (Akerlof & Kranton, 2010). Gandhi’s stewardship doctrine could give impetus to intertemporal environmental guidelines, which are necessary guidelines when talking about protecting resources over long periods of time, sometimes even after the death of the individuals involved. The behavior of a trustee of a river, lake or well is different from the behavior of an owner of the same natural resource. After all, these resources suddenly transcend the concept of ownership and are considered to be held in trust for future generations. In Gandhi’s native Gujarat, there is a long tradition of wealthy people building step wells as an endowment for the welfare of future generations. Gandhi would no doubt have been aware of this custom.
In recent times, identity has become an overworked word. Discourse in contemporary media tends to focus on religion, ethnicity, and sexual orientation. It is important to remember that identity extends far beyond these elements of current controversy. Writing in 1961, social psychologist Erving Goffman pointed out that age is an important determinant of identity. Thirteen-year-olds were ambivalent about the enjoyment of rides, as they felt that standards required younger children to primarily use rides (Akerlof & Kranton, 2010). The peculiarity of identity is that it is not deterministic. While it is true that a short person cannot become a tall person, it does not follow that a short person should define their identity only in terms of absolute or relative size. Amartya Sen makes this case when discussing contemporary pressures on individuals to define themselves in terms of primary ethnic or religious identities. A person can be a vegetarian, avid Beatles fan, a Chelsea fan, in addition to being a white British Anglican or a brown Hindu Bengali (Sen, 2007). Even the standards of aspiration and projection of desired identity, not only as to how one describes oneself but also as to how one would like to be perceived by others, are not frozen legacies, but questions where human action can and does have an impact. This was the identity approach behind James Coleman’s questionnaire to school children, where he asked them the following: “If you could be remembered here at school for one of the three things below- Which one would you like to be below: bright student, star athlete, or most popular? ‘ (Akerlof and Kranton, 2010). Obviously, standards guide people’s self-definitions and definitions of how they would like to be viewed. Akerlof and Kranton brilliantly analyzed the role of gender in identity and how this can have practical impacts on labor markets. âWomen are supposed to stay at home and raise children. They are therefore expected to enter and exit the workforce, whereas men are not â(Akerlof and Kranton, 2010). Akerlof and Kranton summarized in these two sentences the dominant misogynist assumptions that lead to lower wages for women.
(Extracted with permission from Jaithirth Rao’s Economist Gandhi, published by Penguin Random House)