Akerlof and Kranton on identity in economics: inverting the analysis

The concept of identity was introduced into the neoclassical utility maximising framework by Akerlof and Kranton in an analysis which draws directly from social psychology's social identity approach and self-categorisation theory. This paper examines their analysis, and compares the social identity approach and an alternative social psychology identity framework called the sociological approach to identity. Using this comparison, the paper argues that their treating identity as an argument in the utility function leaves unaddressed how individuals' different social identities are related. The paper suggests a framework for addressing this issue by embedding their utility function in a personal identity objective function. The general context for the paper is the Akerlof-Kranton analysis as an example of 'recent economics' defined as a collection of new competing research programmes that make departures from neoclassical economics.