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Title: Identity, Dignity and Taboos: Beliefs as Assets

Author(s): Roland Bénabou and Jean Tirole

Publication Date: February 2007

Keyword(s): anticipatory utility, bargaining, hedonic treadmill, identity, memory, religion, self-control, self-image, self-serving beliefs, taboos and wishful thinking

Programme Area(s): Development Economics, Industrial Organization and Public Economics

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 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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Bibliographic Reference

Bénabou, R and Tirole, J. 2007. 'Identity, Dignity and Taboos: Beliefs as Assets'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6123