Why, after decades of relatively uneventful residence in proximity, might relations between neighboring ethnic or racial groups suddenly explode into violence? I will open this talk with a few examples and proceed to summarize three related approaches to emergence of racial/ethnic cleavages: stratification economics (Darity et al 2017), with particular attention to race in the US; Donald Horowitz’s (1985) approach to ethnic conflict in Africa; and Henry Hale’s (2008) approach to ethnic conflict in the former USSR. Noting a common focus on perceived understandings, I will proceed to microfoundations of social cleavage, using identity theory (Akerlof and Kranton 2001; Shayo 2009) with roots in bounded rationality and the concept of shared mental models (Denzau and North, 1994). After constructing a simple model of identity, as it relates to social and economic context, I will proceed to consider how singular exclusive identities, as opposed to multiple pluralistic identities (Sen 2006), foster the rapid emergence of social cleavages.

Two questions follow:

  1. How do distinct identity concepts relate to the often-rapid emergence of sharp social cleavages?
  2. For given identities and associated preferences, how might the introduction of one or a few new players precipitate the rapid emergence of sharp social cleavage?

For question 1, I model an individual’s composite identity as a weighted combination of an ethnic/racial component and a social class component. More generally, the second component could represent aggregated ‘other’ identities, including items like membership in sports clubs. Discussion will turn to determination of the weights for each term, with attention to key factors discussed in the three previously mentioned approaches. For question 2, I use the concept of group chemistry (Basu, 2011), with attention to within-group altruism and between-group hostility. The relative weights of these two identity components can exhibit a tipping point that induces the rapid emergence of ethnic/racial violence—a phenomenon resembles an information cascade from social network theory. I will close with implications.


Akerlof, George A., and Rachel E. Kranton. 2000. “Economics and Identity.” Quarterly Journal of Economics 115(3), 715–52.

Basu, Kaushik. 2011. “The Chemistry of Groups,” in Kaushik Basu, Beyond the Invisible Hand. Princeton, N.J.: Princeton University Press.

Darity, Darrick Hamilton, Patrick Mason, Gregory N. Price, Alberto Davila, Marie T. Mora and Sue Stockly. 2017. “Stratification Economics: A General Theory of Intergroup Inequality” in Andrea Flynn, Susan R. Holmberg, Dorian T. Warren, and Felicia J. Wong, eds. The Hidden Rules of Race. Cambridge, UK: Cambridge University Press.

Denzau, Arthur T., and Douglass C. North. 1994. “Shared Mental Models: Ideologies and Institutions.” Kyklos 47 (1): 3–31.

Hale, Henry A. 2008. Foundations of Ethnic Politics: Separatism of States and Nations in Eurasia and the World. Cambridge, UK: Cambridge U Press.

Horowitz, Donald. 1995. Ethnic Groups in Conflict. Berkeley, Los Angeles, London: University of California Press.

Sen, Amartya. 2006. Identity and Violence: The Illusion of Destiny. New York: W.W. Norton.

Shayo, Moses (2009). “A Model of Social Identity with an Application to Political Economy: Nation, Class, and Redistribution.” American Political Science Review 103(2) May 2009, 147-174


William D. Ferguson is the Gertrude B. Austin Professor of Economics at Grinnell College. His current research focuses on institutional political economy of development, with attention to collective-action problems as an analytical lens, using game-theoretic logic. His recent book, The Political Economy of Collective Action, Inequality, and Development, proposes a framework for development theory that combines a typology of political settlements with analysis of associated developmental collective-action problems. This book offers a sequel to his 2013 book, Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy, which begins with microfoundations of collective-action problems before proceeding to a game-theoretic approach to power, informal and formal institutions, policymaking, and economic growth. In 2010-11, while visiting the Ostrom Workshop at Indiana University, he discussed his manuscript with the late Elinor Ostrom. Professor Ferguson’s earlier research concerns theory of implicit bargaining power in employment relationships. He teaches classes on political economy, applied game theory, labor economics, and policy analysis. He is past Secretary-Treasurer of the Midwest Economics Association and chair and (key) founder of Grinnell’s Policy Studies Concentration. Professor Ferguson lives in Grinnell, Iowa with his wife, Claudia Beckwith. They have 30-year old twins, Caitlin and Taylor.