The Concept Of Identity In The Economic Analysis Of Individuals’ Behaviors Within Firms: Use & Relevance

 

Béatrice Boulu

 

   Economists have initiated a discussion about both explicit and implicit representations of, and arguments for, economic agents’ identity, often as a complement to preference ordering and constraints that normally characterize the economic agent and provide a representation of his behavior. A simple definition of identity in economics stresses the impact of an economic agent’s self-image on the actions he takes. Further inquiry into the concept of identity and its uses in economic theory reveals three main theoretical discussions: (a) identification, (b) multiple selves, and (c) individuation. The introduction of the concept of identity into the economic analysis of the firm can be drawn along these three discussions and can be applied to three canonical questions within the analysis of the firm in economics, which are (a) the nature of the firm, (b) its boundaries, and (c) internal organization. The main implications of this introduction pertain to the formalization of internal cost structure, internalization decisions, and the description of the firm as an uncertainty reduction device. This approach to the economic analysis of the firm also addresses the recent distinction between social and personal identity, the former being the result of what the agent is and how he is perceived by others, the latter being the self-reflexive act of creating one’s own self-image.