‘Us’ and ‘Them’: the origin of identity, and its economic implications

Abstract

We investigate the origins of identity and the innate proclivity to draw a distinction between 'insiders' and 'outsiders'. We propose an evolutionary explanation: we argue that identity arises because it facilitates survival. In an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would distinguish between insiders and outsiders. We then work out the implications of such preferences in two contemporary scenarios, one entailing rent-seeking behaviour and the other involving public good provision. Our results are in conformity with empirical evidence. JEL classification: D03, D87, D72, H00

Evolutionarily stable in-group favoritism and out-group spite in intergroup conflict

“…Evolutionary stability of other-regarding preferences has generated considerable interest inside economics. 8 An important paper that is closest in spirit to our research question and considers competition between groups is Eaton et al (2011) who also aim at an explanation of in-group favoritism. They consider a framework which combines two distinct action choices: production e¤ort and appropriation e¤ort in a model of con ‡ict.…”

“…In the context of con ‡ict, Eaton and Eswaran (2003) and Leininger (2009) studied evolutionary stability of preferences in contests between individuals and also found evolutionary foundations for spiteful preferences. 10 In a late stage of this work we became aware of a paper by Eaton et al (2011), who also consider at the framework of in-group favoritism with out-group competitors. Their analysis is based on observability of types -hence their results are essentially based on a combination of known results about evolutionary stability of altruism (as in Bester and Güth 1998) and spite (Eaton and Eswaran 2003).…”

“…11 The players are partitioned in two alliance groups of equal size, denoted as group A and group B, each consisting of n players. The con ‡ict between the two groups is described by a …ght that is mapped by a Tullock (1980) lottery contest 12 as follows: all players i simultaneously and independently expend an e¤ort x i 0, which is also equal to their material cost of expending this e¤ort.…”

“…13 This setup determines the material payo¤ of a player as a function of his own e¤ort, the e¤ort choices of the co-players with whom he is matched in the given state game, and the outcome of the respective lottery according to (1). For given 11 The state game here is essentially the static game that is analysed by the literature on inter-group contests, following the tradition of Olson and Zeckhauser (1966). 12 See chapter 2.3 in Konrad (2009) for a survey on the di¤erent …elds (rent-seeking, military con ‡ict, marketing, sports) in which this contest has been developed independently as a tool to describe con ‡ict, for axiomatic foundations such as Skaperdas (1996), and for a survey on existing microeconomic foundations for this decision rule.…”

The Role of Expectations in the Provision of Public Goods Under the Influence of Social Identity

“…Individuals tend to be more cooperative with individuals with whom they share a common social identity (in-group) than with individuals who belong to different social groups (out-group) (Solow and Kirkwood, 2002). Often referred to as ingroup bias, this behavioral pattern seems to be deeply rooted in human nature (Eaton et al, 2011) and can be found in many different cooperative settings (cf. McLeish and Oxoby, 2007;Chen and Li, 2009;Charness et al, 2007;Chen and Chen, 2011;Goette et al, 2006).…”