Why Facts Don’t Change Minds: The Surprising Role of Identity in Economic Decisions

Classical economics assumes rational agents making decisions based on self-interest and facts. However, economic behavior is profoundly shaped by social norms, identities, and the need for belonging. People conform to group expectations even at personal cost, and their economic preferences often align with their social identities.

This explains why debates about immigration, trade, or welfare often become polarized, with facts failing to change minds. People interpret information through the lens of their cultural and political identities, reinforcing existing beliefs.

Bigotry and segregation impose real economic costs by limiting opportunities and reducing social mobility. For example, segregated neighborhoods often face worse educational and employment outcomes, perpetuating inequality.

Policies that promote inclusion, respect human dignity, and foster community engagement can break these cycles. Social programs that emphasize respect and empowerment improve trust and cooperation, leading to better economic and social outcomes.

Recognizing the social construction of preferences is key to designing policies that work in the real world, where identity and emotion matter as much as economics.

Our next topic delves into how technology reshapes labor markets and what it means for the future of work.

Sources: Behavioral economics research, studies on social norms and identity, OECD social inclusion reports [[0]](#__0) [[2]](#__2) [[3]](#__3)