Ryan Avent, responding to Akerlof and Kranton’s Identity Economics”
I’ve found the idea of tribalism to be increasingly useful in understanding political behaviour. Faced with the need to make a decision based on incomplete information, people may often attempt to understand how others like them are behaving and behave in that fashion. This isn’t really a new insight; politicians have been playing to group identities forever. But it certainly seems that economists have been slow to incorporate it into their models of consumer behaviour. As in: I buy this phone because those I recognise as being like me buy this phone, I borrow against my home in this way because others like me do too, I develop expectations about the proper level of educational attainment because those like me have similar expectations, and so on.
Economists are sure to be uncomfortable with this kind of behaviour because it’s much more difficult to model than simple rationality. But if they hope to contribute to the policymaking process, economists need to work harder to understand when a simple price incentive will work appropriately, and when identity filters mean that price changes will generate unexpected results.
My bold above. What makes this more interesting is that the feeling of “having incomplete information” is itself subjective and subject to manipulation. Politicians may try to instigate that feeling in order to evoke tribalist responses in constituents and voters that are easier to predict even than mathematically modeled, neoclassicist rational choice. (After all, who has the time for all that math?)
Similarly, marketers and retailers may also direct their energies at managing the consumer’s relationship and comfort level with the information relevant to a particular decision by emphasizing lifestyle and tribalistic associations. With the identity aspects foregrounded, consumers might be more comfortable ignoring or not bothering to seek out the other information that might help clarify a decision in cost-benefit terms.
Impulse purchasing is an example of this; perhaps it can be understood as identity components overwhelming desire to work out what’s a “good deal” or what’s “fair”. Fairness (in the economic sense, or in general) obviously has little to do with tribalism or the urgency and exigencies of personal identity. Identity is never a game of fairness; it is a game of invidious comparison and advantage and pointed exclusion — a zero-sum game. Identity economics, ideally, recognizes that, how identity concerns can trump a Pareto-based efficiency of decisionmaking that leaves no one worse off. Identity issues and the symbolic aspects of exchange guarantee that someone is always worse off. And that aspect of exchange can be intensified.
Maureen Tkacik makes what may be the same basic point in this essay:
As a rule of thumb (and with some notable exceptions), the profit margins you could achieve selling a good or service were directly correlated to the total idiocy and/or moral bankruptcy of the demand you drummed up for it.
The best way to drum up idiotic and morally bankrupt demand (which might include racist, nationalistic sorts of wishes) is to inject as much concern for identity as possible into an exchange — to attempt to control the rhetoric around a transaction and make it about who the buyer is, not what the buyer is ultimately getting. The entire history of advertising bears this insight out. Creating demand rarely involves the direct usefulness of the product itself but rather the associations that can be attached to it that make it correspond to a lifestyle, an identity ideal. What sucks about consumerism as a hegemonic economic system is precisely this circulation of lifestyles, creating a fog of “imperfect information” and imperfect ideas about that fog, so we don’t know how uninformed we are even about the identity ideals we are pursuing, let alone how far we are from rationally calculating. Profits are largest when the identity quotient within the demand is highest, because it is the most irrational demand, while the corporate form on the supply side keeps it disciplined to adhering to rational calculation. Thus, very rationally, corporations those try to encourage the isolated humans they deal with into worrying more and more about identity issues, catering to our worst tribalistic impulses and insecurities about who we really are.
Amanda Marcotte, discussing choice architecture and political affiliation, writes, “Even simple information can be distorted through an ideological or tribal lens.” This doesn’t make people “stupid,” as she points out; it just suggests how efforts to align our identity with some idealized version (shaped by ads, or tradition, or institution, or personal imagination, or a desire to resist and identities those forces have imposed on us) can shift our perceptions about what information we need and what choices we feel we need to actively make to define ourselves. There is no rational approach to understanding the various bigotries of tribal identification, but there are systematic ways to exploit them and feed into them.
In other words, Thomas Frank’s points in What’s the Matter with Kansas have a broader application. We vote with our dollars for some blinkered evocation of our identity rather than for what economics tells us is in our best interests.