Identity, Dignity and Taboos: Beliefs as Assets

43 Pages Posted: 26 Feb 2007

See all articles by Roland Bénabou

Roland Bénabou

Princeton University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI); University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2007

Abstract

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 behaviors 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.

Keywords: identity, self-serving beliefs, self-image, memory, wishful thinking, anticipatory utility, self control, hedonic treadmill, bargaining, taboos, religion

JEL Classification: D81, D91, Z13

Suggested Citation

Bénabou, Roland and Tirole, Jean, Identity, Dignity and Taboos: Beliefs as Assets (January 2007). IZA Discussion Paper No. 2583. Available at SSRN: https://ssrn.com/abstract=964947

Roland Bénabou (Contact Author)

Princeton University - Department of Economics ( email )

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Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

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