The moral identity of homo economicus
Akerlof and Kranton propose a simple addition to the conventional economic model of human behaviour. Besides the standard selfish elements that define our preferences, they argue that people see themselves as members of “social categories” with which they identify. Each of these social categories – for example, being a Christian, a father, a mason, a neighbour or a sportsman – has an associated norm or ideal. And, because people derive satisfaction from behaving in accordance with the ideal, they behave not just to acquire, but also to become.
Bowles shows that we have distinct frameworks for analysing situations. In particular, giving people monetary incentives may work in market-like situations. But, as a nowfamous study of Haifa daycare centres showed, imposing fines on people who picked up their kids late actually had the opposite effect: if a fine is like a price, people may find that it is a price worth paying.
But without the fine, coming late constitutes impolite, rude, or disrespectful behaviour toward the caregivers, which self-respecting people would avoid, even without fines. Unfortunately, this other-regarding view of behavior has been de-emphasised both in the corporate and the public domain. Instead, strategies have been derived from the view that all our behaviors are selfish, with the intellectual challenge being to design “incentive-compatible” mechanisms or contracts, an effort that has also been recognised with Nobel Prizes.
But, as George Price showed long ago, Darwinian evolution may have made us altruistic, at least toward people we perceive as members of the group we call “us.” The new revolution in economics may find a place for strategies based on affecting ideals and identities, not just taxes and subsidies. In the process, we may understand that we vote because that is what citizens ought to do, and we excel at our jobs because we strive for respect and self-realisation, not just a raise.
If successful, the new revolution may lead to strategies that make us more responsive to our better angels. Economics and our view of human behavior need not be dismal. It may even become inspirational.