Identity Economics

The Basic Idea

Imagine you’re buying a new shirt at the mall. What factors do you think will impact your decision when choosing your new clothing item?

If humans are perfectly rational decision-makers, we would only be influenced by the cost of a shirt and whether it fulfills basic needs, like comfortability and fit. However, according to identity economics, who we are has an impact on our economic decisions. If you identify as a fashionista, you might be influenced to buy a pricey, top-of-the-line shirt from a respected brand. If you identify as an athlete, you might opt for a jersey. If you identify as a parent, you might want to shop at the same stores as other parents.

All these potential influences demonstrate that psychology, sociology and economics are intertwined. Identity economics recognizes this link and predicts behavior by incorporating one’s sense of self into the decision-making process. As a result, it reflects real life behavior within economic models.

Because identity is fundamental to behavior, choice of identity may be the most important ‘economic’ decision people make. Individuals may -- more or less consciously -- choose who they want to be. Limits on this choice may also be the most important determinant of an individual’s economic well-being.


– George Akerlof and Rachel Kranton in their 2002 paper, “Economics and Identity”1

About the Author

Emilie Rose Jones

Emilie Rose Jones

Emilie currently works in Marketing & Communications for a non-profit organization based in Toronto, Ontario. She completed her Masters of English Literature at UBC in 2021, where she focused on Indigenous and Canadian Literature. Emilie has a passion for writing and behavioural psychology and is always looking for opportunities to make knowledge more accessible. 

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