Identity economics

Identity economics is the study of how social identities — the categories people inhabit and the norms associated with them — shape economic behavior. Developed by George Akerlof and Rachel Kranton, the framework challenges the standard economic model of the rational, self-interested agent by arguing that people care not only about outcomes but about whether those outcomes align with their identity.

The core insight is that economic incentives interact with social categories. A worker's productivity depends not merely on wages but on whether their job matches their self-conception. Discrimination persists not only because of information asymmetry but because identity-conforming behavior is itself a source of utility or disutility. The framework suggests that policy interventions must address not just material incentives but the social meanings attached to economic choices.

Identity economics connects to signaling, prestige dynamics, and the broader question of how social systems embed preference formation inside cultural structures rather than treating it as exogenous.