Identity-Based Organizations

A person’s identity is the way she is perceived by herself (personal identity) and by others (social identity). For example, “I am a believer in doctrine x”, “I am racially/morally superior”, “I will be hailed as a martyr.” Forms of identity such as these can be valued per se. In their seminal work on the subject, Akerlof and Kranton (2000, 2010) develop a framework for analyzing the role of identity in economics. Inter alia, one’s ascriptive characteristics determine one’s choice of identity. One’s identity in turn imposes specific norms which shape one’s actions. We build on the Akerlof-Kranton framework by treating identity as a cultural trait which is cultivated in groups. In doing so, we bring together three literatures—the economics of identity, cultural transmission and religion—which have largely been separate. Identity formation is an inescapably social process. Suppose, for example, that an individual invests time/effort in acquiring a system of metaphysical and moral beliefs. These beliefs, if acquired, can be undermined by contact with nonbelievers (Iannaccone and Berman, 2006, p. 116). Likewise, beliefs can be reinforced by contact with believers, with little personal investment. In this sense, identity is a cultural trait that is produced and socially transmitted, as in seminal work by Bisin and Verdier (2000) and Bisin et al. (2011). While cultural transmission has been studied in families and society at large, this paper studies cultural transmission in groups. The insight developed here is that the cultural transmission process produces its