Who decides when we make decisions together?
Economic choices are based on individualism, but group identities and perceptions influence the way decisions are made
Economic theory has devoted a considerable part of its history to understanding how we make decisions. With the marginalist revolution of the second half of the nineteenth century, Jevons, Menger and Walras placed individual choices at the centre of their analysis. The subsequent theory of utility, from Pareto to Hicks and Samuelson, progressively refined the tools for representing preferences and choice behaviour. With von Neumann and Morgenstern, expected utility theory extended this analysis to decisions under risk, whilst Leonard Savage addressed those characterised by subjective uncertainty. Over the course of this long development, models have changed, assumptions have multiplied and mathematical tools have been refined. One assumption, however, has remained essentially unchanged. An assumption so fundamental as to be almost invisible: choices rest with the individual. It is the individual who evaluates, compares, weighs up and chooses. Even when acting altruistically and taking the interests of others into account. When they cooperate or make a sacrifice for the common good, the decision-making unit remains the individual. This assumption is so deeply ingrained that it appears not so much a theoretical choice as a logical necessity. Yet it is by no means self-evident that the subject of choice must necessarily coincide with the boundaries of the individual. There are circumstances in which the question ‘what should I do?’ seems to lose some of its meaning unless it is preceded by another, less familiar to economic theory: ‘who are we, we who must act?’
It is around this possibility that Michael Bacharach builds one of the most original insights of his analysis. In the previous Mind the Economy articles, we saw how “team reasoning” challenges the need to reduce every decision to the maximisation of an individual objective. However, it remains to be understood where this ability to adopt the group’s perspective comes from. Why is it that the same person, when placed in different situations, can reason sometimes as an independent individual and sometimes as a member of a team? This question takes us to a level prior to strategic calculation, to the point where the mental representations through which we recognise ourselves and others take shape. In this regard, Bacharach’s theory converges with that strand of social psychology pioneered by Henri Tajfel and subsequently developed by John Turner.
The Many Identities of the Self
In 1987, John Turner, together with a group of colleagues, published Rediscovering the Social Group: A Self-Categorisation Theory. A seminal work that addresses a central theme in the entire history of the social sciences: how and why can a plurality of individuals give rise to a collective reality? Turner’s answer stems from a seemingly simple observation. Personal identity is not a single, immutable entity. The way we perceive ourselves also depends on the context, the relationships in which we are involved, and the affiliations that take on meaning in a given situation. A doctor may regard themselves as a professional with specific skills, aspirations and interests, but during a health emergency they may see themselves first and foremost as a member of a team. A researcher may perceive themselves as an individual pursuing their own career or as part of a scientific community. A citizen may think of themselves as a worker, a taxpayer or a consumer, but also as belonging to a regional culture or as a member of a political community. These are not merely roles that are added to an already defined personal identity. They are different ways of establishing who we are, which relationships matter and what meaning we attribute to our actions.
Turner and his colleagues distinguish between different levels of self-categorisation in this regard. At the personal level, the characteristics that set us apart from other individuals come to the fore. At the social level, however, it is the similarities that bind us to members of a group and the differences that distinguish that group from others that become significant. A person does not cease to exist the moment they recognise themselves as part of a community. They continue to think and act, but do so through a different self-representation. Social identity does not simply overlap with individual identity like an additional label, but alters the way the latter operates. ‘The group,’ writes Turner, ‘is not merely a specific sphere of social behaviour (…) but a fundamental process of social interaction. From a psychological perspective, the group process embodies a shift in the level of abstraction at which the individual self operates, a transition from personal to social identity, which does not constitute a deviation but rather a part of the normal state of affairs regarding self-perception and social interaction. It is believed that the group plays a causal role from a psychological, and not merely a social, perspective in everyday behaviour’ (1987, p. vii). The significance of this insight lies in recognising that the social realm does not merely intervene from the outside, as a set of constraints, expectations or influences acting upon already formed individuals. It enters into the very way in which each person understands their own identity. There is no need to postulate a mysterious collective mind to recognise that belonging to a group can transform individual thought and action. The group also exists in the way its members perceive one another. And this representation possesses its own causal efficacy.
The implications for the economy are considerable. If the identity through which we interpret a situation can change, then the individual whom the theory treats as a stable unit of decision-making may not always be the most appropriate starting point for understanding that individual’s behaviour.
