An Economic Approach to Cultural Capital

This paper introduces a sociological notion of cultural capital into economics. This is modeled as an infinitely repeated game in which the likelihood of future play (i.e. discount factor) is a function of group specific human capital investments made by the agents before the interactions begin. It is shown that: (1) some individuals expected to make group-specific human capital investments are worse off because their observed investment behavior is used as a “cultural identifier” vis-à-vis the endogenous probability of continuation play; (2) equilibria exhibit bipolar human capital investment behavior by individuals of similar innate ability; (3) as social mobility increases, this bi-polarization increases; and (4) popular policy prescriptions such as educational interventions and affirmative action designed to encourage human capital acquisition can have adverse results in the cultural capital model. ∗Please direct all correspondence to the author at the following address: University of Chicago, 1126 E. 59th Street, Box 9, Chicago, IL 60637. This work has greatly benefitted from thoughtful comments by Susan Athey, Gary Becker, Douglas Bernheim, Edward Glaeser, Jerry Green, Michael Greenstone, Matthew O. Jackson, Lawrence Katz, William Johnson, Steven Levitt, Glenn C. Loury, Bentley MacLeod, Paul Milgrom, Derek Neal, Peter Norman, Debraj Ray, Tomas Sjöström, and Chad Syverson. I would also like to thank seminar participants at CalTech, Chicago, Harvard, Notre Dame, NYU, Pennsylvania State, Stanford, UCLA, Virginia, and Wisconsin for their helpful comments and critiques. The author gratefully acknowledges financial support from NICHD and the National Science Foudation (SES-0109196). The usual caveat applies.