A general theory of social economic stratification: stigmatization, exclusion, and capability shortfalls

This paper develops a general theory of social economic stratification based on the interconnection between a specific micro-level mechanism and a broad macro-level process. At the micro-level, it models stigmatization as selective social identity stigmatization; at the macro-level, it explains social exclusion using the club goods concept from the standard goods taxonomy. The paper argues that individuals in disadvantaged social groups, particularly by race and gender, suffer two kinds of capability shortfalls: capability devaluations at the micro-level and capability deficits and the macro-level. These micro-level social identity stigmatization and macro-level social exclusion mutually reinforce and sustain the economy’s overall hierarchical ordering of social groups. The interconnection of these two processes is formally explained using a simple complexity theory analysis from Simon. The two types of capability shortfalls are argued to imply two types of mutually supporting social policies: those combatting discrimination in the case of stigmatization and those advancing social group reparations in the case of social exclusion. Together, they aim at fostering non-hierarchical, pluralist democratic societies which promote individuals’ capability development irrespective of social identity.