Noted economist speaks on identity model

Last Tuesday, prominent economics professor George Akerlof spoke to an overflow audience in Lawrence Hall about economics and identity. His lecture was sponsored by the Henry George Lecture Series through the Department of Economics.

Akerlof, a professor of economics at the University of California at Berkeley and a Senior Fellow at the Brookings Institute, discussed how the concept of identity could be brought into economic analysis. Akerlof has developed an economic model of identity that incorporates psychology and sociology, which he presented in often-technical detail.

The audience consisted primarily of upper-level economics students, economics majors and most of the Williams economics faculty. Akerlof is best known for an article he published in 1970 titled “The Market for Lemons: Qualitative Uncertainty and the Market Mechanism.” This article, which is one of the most widely cited in the last quarter century, discusses asymmetric information and how it affects markets.

After a brief introduction, Akerlof explained why identity is important in economic analysis. His explanation included the following points: identity can explain behavior which, on its surface, is detrimental, and that identity is the basis for a category of externalities new to economic analysis. Akerlof also added that identity is fundamental to behavior, that the notions of identity evolve within a society and that some in the society may have an incentive to manipulate them. He then discussed each point in detail, emphasizing essential aspects with transparency slides.

Akerlof concluded his hour lecture by presenting the four main lessons his model aims to teach.

“The model gives economists an interpretation of the standard sociological model of the minority underclass. It gives an interpretation of an important pro and con in the debate about affirmative action. Third, it gives some intuition as to why some programs, for example Job Corps, have been successful in helping the disadvantaged. Finally, it suggests the existence of many externalities in underclass neighborhoods.”

Many attendees found the lecture to be engaging and thought provoking. Senior economics major and economics teaching assistant Michael Rapport commented, “I thought it was pretty interesting. I didn’t think he was a very dynamic speaker, but he had some good ideas and they really are relevant.”

Political economy chair and professor of economics Ralph Bradburd was very effusive in his praise. “George Akerlof is, as ever, imaginative and interesting, looking at issues in ways that economists haven’t looked at them before and, as a result, deriving insights that are valuable.”

William Brough Professor of Economics Roger Bolton added, “It was a very good talk and I enjoyed it very much. I think it was very useful to economics students to give them some sense of how ideas from economic sociology, which I happen to be very interested in, can be translated into economic terms.”