Rachel Kranton on Identity and Economics

In traditional economic models, individuals have one overriding motivation: utility. While this utility-maximizing paradigm has its advantages, it risks overlooking other forces that shape individual decision-making. One such force is group identity. Whereas a utility-maximizing model emphasizes what one wants, an identity-based model might emphasize what one believes they should want — because of who they are.

Rachel Kranton is the James B. Duke Professor of Economics at Duke University, where she specializes in how institutions and social forces affect economic outcomes. Her work has helped build the foundation for an approach to economics that incorporates identity, transforming the way economists understand individual decision-making. She joins hosts Steven Durlauf and Ariel Kalil to discuss her identity-based approach to studies of schools, gender dynamics, workplace culture, and more.