Voiceover: “The good old days, when Mrs Pamela Benjamin was caught smoking in the garden. She got a severe scolding and no supper that night. Later, Mrs Cynthia Roberts, was caught smoking in the cellar, behind the preserves. Although she was 34, her husband sent her straight to her room. Then, at last, women won their rights.”
Cue drums, jaunty music. A young, blonde, confident woman, dressed in black, hair permed, the height of fashion, strides confidently towards the camera. Singers begin to chant: “You’ve come a long way, baby.”
Voiceover: “Introducing Virginia Slims. The slim cigarette for women only.”
In 1968 the tobacco giant Philip Morris decided to make a determined assault on a potentially lucrative but relatively unexploited market — women. So the company launched Virginia Slims. And the way it did so tells you a great deal — about gender differences, of course — but also about class, race, free-market economics, and about just how difficult it will be to do what David Cameron and Gordon Brown both said this week is their aim: to create a more mobile society.
The Virginia Slims campaign had two features. The first was to link smoking to women’s liberation. Each advert screened sepia film clips of suffragettes marching with banners proclaiming the need for votes for women. Smoking was presented as an emblem of emancipation. At the same time, while women and men were equal, the cigarette was different. The campaign emphasises that Virginia Slims are long, narrow, somehow more feminine.
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Philip Morris was on to a winner. Virginia Slims were a great success, riding a wave of female smoking. In the 1920s, 60 per cent more men than women smoked. In the 1960s the difference eroded quite quickly, and by 1990 it had all but closed.
This intrigued the Nobel prize-winning economist George Akerlof. Traditional economics didn’t seem to offer an explanation. Standard theory, he reflected, would look at the declining difference between male and female wages over time. But this didn’t seem to be adequate, because in the 1920s even women with high incomes did not smoke. It didn’t seem to reflect as rich an understanding of female economic behaviour as was clearly possessed by the Philip Morris marketing department.
And out of this reflection arose an important new book, to be published next month. Professor Akerlof and Rachel Kranton have invented Identity Economics.
If I used the phrase “he looks like a geography teacher”, you would immediately know what I was getting at. You would have a picture in your mind of a geography teacher and, although not all such teachers look like that, surprisingly many do.
There are traditional economic explanations for this, of course. Geography teachers earn similar salaries and work in similar environments, making similar clothing affordable and practical. But there is more to it than that. Geography teachers (and doctors and advertising creatives and Tories and annoying political columnists who scored 23 per cent in their geography exam when 15 years old but have nothing against geography, honestly they don’t) dress like each other to fit in with others in their peer group. They adopt an identity. Preserving our identity, obeying its rules, living by its norms is, Akerlof and Kranton argue, one of our central economic objectives. And our behaviour doesn’t make much sense unless the importance of identity is understood.
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The two economists provide the payment of wages as an example of the usefulness of identity economics. Employees paid a monthly standard wage have an incentive to exploit the hard work of others and the inattention of their employers. A wage tempts them to slack. So companies devise ways to make sure that they keep hard at it — they pay by performance and monitor what their employees do. Yet performance pay is very hard to target and monitoring very expensive.
Companies thus have another tool. They try to make success part of the identity of the employee. They have mission statements, team-building weekends, initiatives aimed at raising morale. Nowhere is this done more thoroughly than in the Armed Forces. Traditional economists might struggle to explain joining and remaining in the Army. Identity economics has no such difficulty.
There is, unfortunately, a dark side to identity economics. It is one explanation of why the great promise of free-market capitalism has been only partly delivered. In a free market, discrimination carries a heavy cost. Those who wish to indulge in it end up paying more for less good labour. And the larger the group being discriminated against, the larger the price. So one would anticipate that, over time, discrimination would fall as markets become more competitive. And so it has.
Yet society remains surprisingly immobile, with the success of some ethnic groups and of women falling short. Why? Is it just because employers have what Professor Gary Becker termed a strong “taste for discrimination”? Identity economics provides further illumination.
Take nursing. Only 7 per cent of nurses in the United States are men. And, as Akerlof and Kranton note, “by and large, men and women in the United States work in different occupations”. They believe this is because “jobs have tags” and “female nuclear engineer and female Marine seem contradictory, as do male nurse and male secretary”. Critically, this is true not just for employers (which might be explained by a taste for discrimination), but also for employees themselves.
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In schools, students join peer groups and begin to resemble each other in dress and forms of behaviour. In US high schools, for instance, there is a polarisation between jocks and dropouts with, perhaps, African-American pupils forming a further group. And the behaviour of these individuals is far more influenced by the social norms of those sharing their identity than it is by the future economic consequences of their behaviour.
If you work hard, you may get a better job, but you risk losing face with your group. The free market may (or may not) offer great opportunity, but such opportunity comes second to identity.
The good news that identity economics has for Mr Brown and Mr Cameron is that identity is understandable and changeable. Being a lawyer was man’s work once. But the bad news? Changing peer-group behaviour takes a very long time indeed.