Review: IDENTITY ECONOMICS–How our Identities Shape Our Work, Wages, and Well-Being

5 Star, America (Founders, Current Situation), Best Practices in Management, Civil Society, Consciousness & Social IQ, Economics
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5.0 out of 5 stars Concise, Relevant, Documents New Knowledge, Respects Work of Others
July 6, 2010

George Akerlof and Rachel Kranton

This book is a solid five, and one of those instances when brevity adds value. While I was concerned to see no discussion of “true cost” economics and the book is overly fawning on Goldman Sachs (written before Goldman Sachs was exposed for its multiple fiscal crimes against both investors and governments), the superior References, Notes, and Acknowledgements balanced this out. This work began in 1995.

This is an engrossing book and it immediately overcame my general disdain for economists, most of whom have only recently discovered information asymmetries and most of whom refuse to recognize that corruption in the US government and cheating across the US economy is fully the equivalent of transnational organized crime in cost to society.

Overall I consider this book very useful as both an overview (with most impressive “by name” citation of prior art on every page) and as a critique of conventional economics. This book is an excellent complement to the book I just reviewed, The Hidden Wealth of Nations and will be complemented by the book I will review next week, Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs. See also my review of Nobel-worthy The Fortune at the Bottom of the Pyramid, Revised and Updated 5th Anniversary Edition: Eradicating Poverty Through Profits.

Core concept: IDENTITY is actualized psychological norms within a social context.

QUOTE (page 8): Identity economics restores human passions and social institutions into economics.”

Bravo. See my reviews of Radical Man and The Manufacture Of Evil: Ethics, Evolution, and the Industrial System as well as 1491: New Revelations of the Americas Before Columbus and The Wealth of Networks: How Social Production Transforms Markets and Freedom. We are on the verge of a socio-economic, ideo-cultural, techno-demographic revolution, and I know of no government that “gets it” although I consider the Nordics to be gifted in the areas needed to create what I call INTELLIGENCE for EARTH: Clarity, Diversity, Integrity, & Sustainability.

The book is extraordinary in part because the authors, one of them a Nobel laureate, take pains to identify and respect all those who have made intellectual contributions, and especially Gary Becker, who coined the term “Social Economics” and has many superb books to his credit.

This book is at the intersection of social economics, ideo-cultural value definitive, and techno-demographic leveraging. All of these represent “what people care about” and ultimate give me two bottom lines:

1) We know next to nothing about what George Will calls Statecraft as Soulcraft; and

2) Identity can be monetized–identity is the ultimate “intangible” value only it is actually very tangible.

The book offers a number of observations that I would think need to be read and reflected on more than once.

+ Cultural training *will* lead to individuals making choices harmful to themselves (those of us who have served in the military know the culture that leads one to jump on a grenade to save others)

+ Internalized norms fall apart when one person cheats–this is the “broken window” in the cultural framework and I cannot help but think of such books as The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead; The Global Class War: How America's Bipartisan Elite Lost Our Future – and What It Will Take to Win It Back; and my own Election 2008: Lipstick on the Pig (Substance of Governance; Legitimate Grievances; Candidates on the Issues; Balanced Budget 101; Call to Arms: Fund We Not Them; Annotated Bibliography).

+ BIG INSIGHT: Monetary incentives are counter-productive in team environments that succeed in creating a culture of identity that fosters teamwork, where mission understanding and commitment are core to performance.

+ The authors do a fine job of focusing on the mis-direction of schools, points out that despite what Carnegie and Rockefeller intended, schools should NOT be factories, they should be social institutions with a socialization role, helping every child BELONG. I see my own three teen-agers in how they describe the nerds and jocks as accepting of authority, the others (Goths plus) as not. I am especially impressed by the discussion of schooling that offers many choices while demanding independent thinking and avoiding insider-outsider fissures.

The discussion of the military is disappointing. Neither of these individuals has a visceral understanding of this culture, they are weakest here.

+ The discussion of the division between management and men being counterproductive is a good one. See Lionel Tiger above. When management thinks the men are commodities, the social value, the intangible value that this book speaks to, is lost.

+ The quality of teachers is emphasized by this book and I am again forced to recognize that too many school districts accept mediocrities because that is what the teacher schools are putting out. The quality of the teacher makes a HUGE difference as described by these authors, and I feel a sense of despair in realizing there is no one at all in Washington or any other national capital that cares about this.

+ Gender segregation is an area where the authors teach me. I had no idea two thirds of our work force (in the USA) is separated by gender, or that gender “norms” sabotage the effectiveness of the “outside” gender seeking to work.

+ HARRASSMENT LOWERS PRODUCTIVITY. I am fascinated by the authors' discussion of how some businesses choose to forego diversity as a means of keeping a more contented “red neck” workforce that costs less, versus striving for diversity and paying the extra wages needed to make it stick.

The authors are compelling and most interesting in refuting all notions that the “market” might solve social inequalities, and state with assurance that a combination of government intervention and a broad social movement are necessary to overcome the pervasive obstacles to achieving equality.

Although I have read a number of books on poverty, I am surprised to learn that two thirds of black children in America are living with a single mom, and that three fifths of the mothers are living in poverty–and if one looks at books such as An Atlas of Poverty in America: One Nation, Pulling Apart 1960-2003, the draconian concentration of wealth at the top is matched by the unnerving increase in the numbers of those in poverty in America. See also my review of Nobodies: Modern American Slave Labor and the Dark Side of the New Global Economy.

I am deeply impressed by the discussion of residential uplift programs that mix white and black, rich and poor, and have a vastly greater effect because the uplift programs by being residential (full time) are teaching more than job skills, they are teaching social skills.

The authors focus overly much on the insider-outsider model of understanding, and do not address information asymmetries as much as they could –the term appears only twice.

The other negative is the lack of any reference to Open Money, which does assign value to everything, most of it intangible value vice “hard cash” value.

The authors conclude that there are five ways IDENTITY changes economics:

1. Individual actions (e.g. body art and giving)

2. Externalities (e.g. getting along or not, free riders or not)

3. Creating and leveraging categories (e.g. politics, religion, advertising)

4. Identity & regret (buy the book)

5. Choice of identity (mothers versus managers, school choice, immigration with or without assimilation).

This is a serious book, a substantive contribution, at least for a non-economist such as I, and I ended my reading by examining every single reference in the bibliography, which is extensive.

Five stars, no question at all in my own mind.

I have a note, “Ethnography as foundation for economics of intangible systems of system valuation.”

NOTE: Amazon limits me to ten hot links, which I do not understand. I have learned how to preserve all the links, my review with all links active can be found at Phi Beta Iota, the Public Intelligence Blog, where you can also browse all my reviews easily sorted into the 98 categories in which I read.

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