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Identity, Dignity and Taboos: Beliefs as Assets

  • Bénabou, Roland
  • Tirole, Jean

We analyze social and economic phenomena involving beliefs which people value and invest in, for affective or functional reasons. Individuals are at times uncertain about their own 'deep values' and infer them from their past choices, which then come to define 'who they are'. Identity investments increase when information is scarce or when a greater endowment of some asset (wealth, career, family, culture) raises the stakes on viewing it as valuable (escalating commitments). Taboos against transactions or the mere contemplation of tradeoffs arise to protect fragile beliefs about the 'priceless' value of certain assets (life, freedom, love, faith) or things one 'would never do'. Whether such behaviours are welfare-enhancing or reducing depends on whether beliefs are sought for a functional value (sense of direction, self-discipline) or for 'mental consumption' motives (self-esteem, anticipatory feelings). Escalating commitments can thus lead to a 'hedonic treadmill', and competing identities cause dysfunctional failures to invest in high-return activities (education, adapting to globalization, assimilation), or even the destruction of productive assets. In social interactions, norm violations elicit a forceful response (exclusion, harassment) when they threaten a strongly held identity, but further erode morale when it was initially weak. Concerns for pride, dignity or wishful thinking lead to the inefficient breakdown of Coasian bargaining even under symmetric information, as partners seek to self-enhance and shift blame by turning down 'insultingly low' offers.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6123.

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Date of creation: Feb 2007
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Handle: RePEc:cpr:ceprdp:6123
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  1. Rabin, Matthew, 1994. "Cognitive dissonance and social change," Journal of Economic Behavior & Organization, Elsevier, vol. 23(2), pages 177-194, March.
  2. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
  3. Roland G. Fryer, Jr. & Matthew O. Jackson, 2003. "Categorical Cognition: A Psychological Model of Categories and Identification in Decision Making," NBER Working Papers 9579, National Bureau of Economic Research, Inc.
  4. Ulrich Horst & Alan Kirman & Miriam Teschl, 2007. "Changing Identity: The Emergence of Social Groups," Economics Working Papers 0078, Institute for Advanced Study, School of Social Science.
  5. John Smith, 2007. "Reputation, Social Identity and Social Conflict," Departmental Working Papers 200709, Rutgers University, Department of Economics.
  6. Wichardt, Philipp C., 2007. "Why and How Identity Should Influence Utility," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 193, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  7. Oxoby, Robert J., 2003. "Attitudes and allocations: status, cognitive dissonance, and the manipulation of attitudes," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 365-385, November.
  8. Wojciech Kopczuk & Joel Slemrod, 2005. "Denial of Death and Economic Behavior," NBER Working Papers 11485, National Bureau of Economic Research, Inc.
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