George Akerlof - Behavioral Macroeconomics and Macroeconomic Behavior (Part VI : Poverty and Identity) lyrics

[VII. Poverty and Identity] If income distribution is a topic in macroeconomics, as many have professed, then behavioral economics also offers insight on the most enduring macroeconomic problem facing the United States: the disparity in income and social condition between the majority white population and the African-American minority. As a legacy both of slavery and the Jim Crow discrimination that followed it, poverty weighs especially heavily on AfricanAmericans. The black poverty rate of 23.6 percent in 2000 was roughly triple the white rate of 7.7.83 Despite comprising only about one-eighth of the population, African-Americans have almost one-fourth of all U.S. poverty. The reality is yet more disparate than these statistics indicate because the problems of the poorest African-Americans go beyond mere poverty. They include extraordinarily high rates of crime, drug and alcohol addiction, out-of-wedlock births, female-headed households, and welfare dependency. Statistics on incarceration indicate that even the worst of these problems affect a significant fraction of African-Americans. Thus, for example, about 4.5 percent of black males are either in jail or in prison. The black male incarceration rate exceeds the white male rate by a factor of eight to one. And the lifetime chances of a black male youth entering prison exceeds one-fourth. Because standard economic theory, in our view, is incapable of explaining such selfdestructive behavior, Rachel E. Kranton and I have developed models, based upon sociological and psychological observation, to understand the persistence of African-American disadvantage (2000). Our theory stresses the role of identity and the decisions that individuals make about who they want to be. In our theory of minority poverty, dispossessed races and cla**es face a Hobbesian choice. One possibility is to choose an identity that adapts to the dominant culture. But such an identity is adopted with the knowledge that full acceptance by members of the dominant culture is unlikely. Such a choice is also likely to be psychologically costly to oneself since it involves being someone “different”; family and friends, who are also outside the dominant culture are likely also to have negative attitudes toward a maverick who has adopted it. Thus individuals are likely to feel that they can never fully “pa**.” A second possibility is to adopt the historically determined alternative identity, which, for many minorities, is an oppositional culture. Each identity is a**ociated with prescriptions for ideal behavior. In the case of the oppositional identity, these prescriptions are commonly defined in terms of what the dominant culture is not. Since the prescriptions of the dominant culture endorse “self-fulfillment,” those of the oppositional culture are selfdestructive. The identity of the oppositional culture may be easier on the ego, but it is also likely to be economically and physically debilitating. This identity-based theory of disadvantage is consistent with a considerable body of evidence. For example, it captures the central findings of studies by authors such as Franklin Frazier (1957), Kenneth Clark (1965), William E. B. Du Bois (1965), Ulf Hannerz (1969), Lee Rainwater (1970), William J. Wilson (1987,1996), and Elijah Anderson (1990). Read any African-American biography: the uncomfortable dance between acceptance and rejection invariably takes center stage. The identity theory of minority poverty has social policy implications that depart from those derived from standard neocla**ical theory. For example, the standard economic theory of crime and punishment implicitly argues for combating crime by deterrence: raise the stakes high enough, as California did with its “three strikes and you're out” law, and the potential criminal will think twice. But the prisons are full and crime has not stopped. An identity-based theory suggests, in contrast, that large negative externalities from incarceration may offset the shortrun gains from deterring criminal activity through tougher incarceration policies. Prison itself is a school for countercultural identity, and thus the breeding ground for future crime. Moreover, externalities in identity formation argue for programs to allay crime before it has occurred. These include, for example, effective, easily accessed drug treatment and rehabilitation programs and public jobs for innercity youth. Identity theory suggests that the benefits of increased expenditures for schools in African-American neighborhoods with high poverty rates are likely to be substantial: AfricanAmerican children have been found to be particularly responsive to differences in teacher quality and cla** size. It may take the extraordinary teacher and close personal attention to sort through student issues concerning identity in addition to covering the standard curriculum. Finally, the externalities involved in identity formation argue for affirmative action, because it is a symbol of welcome for AfricanAmericans into the white society that has rejected them for so long.