412. Identity in economics

Earlier in this blog (items 8, 9, 10, 265) I noted that identity is personal as well as social/cultural. I also proposed that both individually and culturally identity is not single but multiple, and that it is not fixed but subject to development. There is no given, fixed essence that constitutes identity.

Socially, identity arises, in particular, from one’s being held accountable for one’s actions and utterances. Individually, identity develops from interaction with others, with their contrasting ideas and actions.

David Hume argued that there is no coherent personal identity; only a buzz of experience without coherence or stability. In item 8 of this blog I used the work of Antonio Damasio, arguing that the brain develops representations, embodied in neural connections, first of internal, endocrinal processes, in the body. Those, in turn, are regulated by means of such representations. Next, there arise representations from sensory impressions from outside, coalescing into concepts.

According to Gerald Edelman, concepts arise in analogy to evolution, in ‘Neural Darwinism’. In mutual competition between emergent mental structures, those that produce success, in satisfying urges and passions, are reinforced at the cost of others. Such processes can produce a multiplicity of selves.

Is Hume, right, then? Is there no coherence in some sort of identity, even if multiple? I proposed that some coherence arises from the fact that what emerges in the brain is connected with survival of the body in which it forms thought, because that survival requires functional coherence, and that constitutes identity. Individuality is next produced by the assimilation of experience, and accommodation to it, along one’s individual life trajectory.

How does all this sit in economic theory? It doesn’t. In economics, identity is only individual, not social, and it is assumed as given, in sets of preferences. To include identity, economics needs to include preference formation. For that, it would need to include the interaction between people by which preferences and identity are formed. For that, economics would have to integrate with sociology and cognitive science.

Liberal individualistic market theory prides itself on yielding the widest possible scope for individual freedom. But, as I argued in item 49 in this blog, the highest form of freedom is freedom also from one’s own prejudices, and for that one needs the opposition from others. To profit from that, one needs to develop empathy: understanding what makes other people tick.

For partnership in development one also needs trust. The most fundamental reason for this is that the development of identity, and of relations needed for it, entails radical uncertainty: one does not know in advance how even one’s own preferences and options for choice will develop, and this renders calculative rational choice concerning relationships inoperable. One has to dare the leap faith of trust or forego the social and cultural sources of the development of identity. However, in economics trust that goes beyond rational control, in the exercise of hierarchy, contracts or incentives, cannot exist. 

In sum, for an answer, the apparently simple question of identity in economics requires a fundamental revision of economic theory. The crux of it lies in the social and cultural sources of identity, and the radical uncertainty involved in identity formation.

In present times of ‘filter bubbles’ or ‘echo chambers’, many people take note only of  opinions similar to their own, in social media. That robs them of the opposition from contrasting views, as a source of identity development. That development will then be stunted.

With its view of the individual as autonomous, economics has contributed to this.