Identity is an incredibly complex phenomenon, however, Akerlof and Kranton suggest that it can be reduced to a formula by adjusting standard utility to incorporate social norms. However, it is difficult to predict to what extent identity impacts economic behavior, since identity consists of many different factors. Whilst many people agree that identity impacts behavior, many disagree that it can be simply reflected through economic models. The fact that Akerlof and Kranton made their 2010 book palatable for a mass audience with little psychological or economic background may have increased room for criticism.7
Some might argue that norms and identity are separate influences that should not both fall under the umbrella term ‘identity economics’. It is difficult to discern the difference between identity as an individual choice and identity as a category forced upon people by society. Suggesting that one’s social group is the largest influence over economic decisions also suggests a lack of freedom in making choices. We often identify as part of many different social groups, and identity economics does not offer a clear way to analyze which identities have the greatest influence over behavior.8
Education and Identity Economics
It can be extremely difficult to get students motivated to pursue their education. When school feels like an obligation, students may not perform well due to a lack of meaningful attachment to their studies. While some behavioral science theories (like the behavioral perspective, which claims all behavior is a reflection of conditioning) suggest that providing students with rewards can help motivate them to study, identity economics could provide a new tool to increase student engagement.
In a 2002 literature review, Akerlof and Kranton suggested that student identity is the primary motivation for studying, and that a school’s success depends on how well students integrate into the school’s social setting.9 One study they reviewed revealed that students tend to divide themselves amongst groups (like jocks, nerds or theatre geeks), and that the group an individual belongs to impacts their academic performance. This led Akerlof and Kranton to believe that after choosing a social group, students then choose how much effort they want to put into their studies because of a desire to fit in with their group.9 A stereotypical example would be a jock deterred from studying due to a desire to fit in by playing sports after school, instead of attending tutoring.
The values a school emphasizes can also impact what subjects students do well in. For example, if a school prides itself on an annual theatre production, students might put more effort into theatre than sports to try and fit in with the social setting. Alternatively, Akerlof and Kranton found that students whose identity conflicted with the school’s identity, and therefore who did not want to assimilate into the school, showed very low levels of effort. Akerlof and Kranton also postulate that one reason students in private schools tend to have better grades than those in public schools is because private schools are able to perpetuate a particular ideal and identity, whilst public schools are targeted towards diverse communities.9
Identity economics therefore reveals how important it is that schools cultivate a social identity that students feel compelled to adhere to. If students and teachers are both working together towards a common purpose, we are likely to see academic performance improve.10
Robbers Cave Experiment
A famous experiment that helps support identity economics is called the Robbers Cave Experiment. The experiment was conducted by social psychologist Muzafer Sherif, who believed that group conflict can arise due to competition over limited resources, known as realistic conflict theory. This opposed the prominent views in the 1950s that posited individuals, especially men, were conflict-prone by nature. Sherif believed context mattered.11
In the experiment, Sherif ran a boy’s camp in a remote location in Oklahoma. Twenty-two eleven-year-old boys were split into two groups and sent to opposite sides of the campsite. They had no idea that the other group existed and the boys were unaware that they were part of an experiment. In order to create a shared identity, shared activities were held within each group for the first week of the experiment which, to Sherif’s surprise, even resulted in the formation of group names. In the second week, after a group identity had been formed, the two groups met and competed against one another. This quickly resulted in name-calling, taunting, and physical acts of aggression. This behavior heavily supported the theory of in-group bias.12
For the third component of the study, however, Sherif wanted to show that when groups need to work together for a common goal, conflict diminishes. Sherif created situations in which the groups’ cohesion mattered if they wanted to succeed. For example, when a supply truck broke down, the groups had to work together to carry supplies to camp. After the boys engaged in these activities, there was less conflict between the groups.12
The Robbers Cave Study demonstrates that contact alone is not enough to reduce conflict between groups. Instead, there must be a common objective that groups work towards. This finding shows that people’s sense of self, not just their physical proximity to social groups, influences behavior. 12