But in most economic analysis, the decision makers’ point of view is quite narrow. It starts with what people like and don’t like. People may have a taste for oranges or bananas, or a preference for enjoying life today instead of saving for the future. They then decide what to buy or how much to save, given prevailing prices, interest rates, and their own income. Economists have included in such analysis that people interact with others, but they have largely treated such social interactions in a mechanical fashion, as if they were commodities.
As economists and policymakers, we could be content to continue looking only at prices and income and related statistics to explain people’s decisions. In some circumstances, that might be enough to understand what is happening. But in many other situations, we would miss major sources of motivation – and thus would adopt useless, if not counter-productive, measures aimed at producing the outcomes we seek. Identity Economics provides the broader, better vision that we need.