Economic models aren’t always applied to subjects like affirmative action and gender politics in the workplace.
But in a lecture at Yale yesterday, Nobel Prize-winning economist George A. Akerlof discussed the way he applies his theories to real-world issues.
Akerlof, a Goldman Professor at the University of California at Berkeley, gave the Arthur Allen Leff Fellowship Lecture on “Identity and Economics” in the Yale Law School before an audience of approximately 150 people.
“Akerlof was a great speaker whose theories I feel revitalize the debate about affirmative action,” Peter Ogilvie ’05 said. “He obviously has novel ideas in the field of economics.”
One of Akerlof’s economic models relates to issues like affirmative action.
Akerlof sets up a model where there are two groups, Green and Red, and Green is the group people want to be in. When person A does a Red activity he would lose the Green identity, involving a loss in utility, or happiness. Furthermore, A’s action would threaten his fellow B’s Green identity as well, so B will respond in a negative manner.
Akerlof applied this abstract model to the problem of minority poverty.
He said a clash of cultural identities results in minorities rejecting the dominant culture and engaging in self-destructive behaviors to retain their own identities.
Akerlof said one aspect of his model supports affirmative action: an apology on behalf of whites about past injustices toward blacks would decrease the tension between the two groups and invite blacks to join whites. On the other hand, Akerlof said affirmative action places the blame on the whites, which increases group tension and further divides our society.
Akerlof also applied his theory to gender discrimination in the workplace.
He said certain jobs have gender associations. For example, nurses are mostly associated with females while soldiers are mostly associated with males.
When a woman enters a traditionally male workplace, the identity of her male co-workers is threatened, Akerlof said. The man may feel that his job is no longer masculine due to his female co-worker, and to restore his identity he may respond by teasing or sexually harassing the woman.
During the lecture, Akerlof also expressed concern about California’s “three strikes you’re out” criminal justice law.
“The short-run effect may be good, but the long-run effect may be disastrous,” Akerlof said. “We should have a long-run policy for changing people’s identity.”
While conventional economic analysis does not consider psychological issues in its models, Akerlof said these considerations are necessary to help explain various phenomena like minority poverty and gender discrimination. He concluded on a positive note, saying public policy can positively change people’s mindsets.
In 2001 Akerlof won the Nobel Prize in Economic Sciences, which he shared with colleagues A. Michael Spence and Joseph E. Stiglitz, for his work on asymmetric information.