From Identity to Agency in Positive and Normative Economics

Abstract

This paper argues about the importance to reflect over what constitutes the identity of the economic agent, both from the perspective of positive and normative economics. Regarding the former, we suggest that several aspects of social and personal identity are essential to explain market coordination on the basis of the existence of communities. Regarding the latter, we claim that the evaluation of social states through the aggregation of individual utilities depends on a commitment over an account of who the economic agent is.

Keywords:

• identity
• market coordination
• welfare economics
• economic agent

JEL codes:

• B4
• D00
• D69
• Z13

Notes

¹ An exception maybe is the need to introduce game theory to account for the fact that social identity emerges through social (and therefore strategic) interactions.

² The well-known folk theorem in game theory demonstrates that in an indefinitely repeated game with low discount rates, players may engage in strategies of conditional cooperation. The famous “tit-for-tat” strategy (Axelrod, 2006) is one among several strategies that may generate cooperation. The more general result of the folk theorem is that any outcome that guarantees players at least their minimax gain can be an equilibrium.

³ Conversely, these signals of group identity act as barriers to entry for the outsiders. Indeed, there are costs for belonging to a community/club. These costs include the costs of observing community rules among other things. Community rules and shared values also confer to their members a common identity that distinguishes them from the outsiders. Yet, an outsider can decide to adopt these rules in order to join the community, the club, in particular in order to receive economic benefits. Admittedly, some characteristics are easier to adopt (and less costly): It is relatively easier to change your dietary rules than your race or your biological sex.

⁴ The fact that one is a University professor permits other individuals to form expectations regarding how one will behave in the academic context, but not necessarily in other contexts where this social category is irrelevant.

⁵ For a discussion and a comparison of Sen’s and Ross’ views on agency and rationality, see Hédoin (2016).

⁶ Parfit’s arguments mostly rely on two kinds of thought experiments: teleportation cases and spectrum cases. The former corresponds to situations where one’s duplicate is teleported at another location with one’s original body either destroyed or preserved intact. The latter corresponds to situations where the brain and/or the body of a person is altered through piecemeal interventions (e.g. substituting one’s brain tissue for another person’s). It is then asked if personal identity is preserved through these interventions and if not, at what point one is no longer the same person. Parfit (quite convincingly) contends that in most cases such questions have no determinate answers.

⁷ Hedonic utilitarianism as originally developed by Bentham and others was of course relying on such a mental state account. Nowadays, mental state accounts are essentially endorsed by behavioral economists who consider that “experienced utility” rather than “decision utility” is what normatively matters. See Fumagalli (2013) for a discussion.

⁸ This point is especially relevant in the context of recent discussions in normative economics over so-called libertarian paternalism. On this, see Ferey (2011).

⁹ A good example is the French public policy for Lifestyle and home care services development that dramatically failed to organize exchanges through anonymous middlemen networks when local associations used to be a signal through their well-known identity. More details can be found in Gallois and Nieddu (2016).