Interview with Eliana La Ferrara

Source: Women in Economics

Eliana La Ferrara is an Italian economist who has pioneered the study of how culture and identity shape people’s economic and social behaviour. Her research topics have included how telenovelas induced Brazilians to have fewer children and divorce more often; why Ghanaian kinship groups create informal credit markets; and how trust is lower in financially unequal or ethnically fragmented communities. She holds the Fondazione Romeo ed Enrica Invernizzi Chair in Development Economics at Bocconi University in Milan, and earlier this year won the Birgit Grodal Award, bestowed by the European Economic Association on female economists who have made a significant contribution to the discipline

When and where were you born?
I was born in 1968 in a small town in Sicily called Mistretta. This is where my mother was originally from.

How has this shaped you?
I grew up in the north, near Como. I wasn't raised in Sicily, but I happened to have this heritage. This has shaped me deeply, because Sicily and Lombardy have very different structures, both in terms of economic activity but also they're culturally quite far apart. All my life I’ve been sensitive to reconciling different ways of being. I was quite proud of the warmth and some of the spontaneity that Sicilian culture has – its welcoming nature. But I was raised in a town that borders Switzerland, which was all about efficiency and productivity. So my upbringing is a combination of the two.

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Did this get you thinking about how culture affects economic choices?
Maybe in later years, yes. As I grew up, it made me realise the extent of discrimination people face. What is now the attitude towards immigrants used to be the attitude northern Italians had towards southern Italians. One story that my mother used to tell me was that when she and my father moved to Como – they had recently graduated university in the mid-1960s – they struggled to find an apartment to rent. They had jobs, but people didn't like their accent. There was a stereotype of southern people as being less educated and reliable.

What turned you towards economics?
Leaving high school, I was very interested in social issues, but I wasn’t particularly knowledgeable or passionate about economics. In fact, I considered doing psychiatry or philosophy. Then someone mentioned this particular programme at Bocconi University that offered a very solid training in quantitative economics, combined with exposure to sociology, political science, logic – so it felt as if I would have a rounded training.

Why is identity important in economics?
In economics, when we try to describe what choices people make, we always think that they’re trading off some benefits and some costs, and these benefits and costs can be quantified using prices. Or, you give me information about a new technology or opportunity, and I can decide to adopt it. But very often you find paradoxical situations where people are even willing to lose money – or you show them an opportunity and they don't take it up. For example, in some countries, it’s not considered appropriate for women to work outside the home, so they “give up” that money and the opportunity to educate their daughters. Identity concerns can help understand some of these apparently inconsistent choices. 

To a non-economist, this seems a little obvious. Why has it taken so long for economics to start thinking about culture?
Economists for some time thought that if we cannot offer much guidance on how to change a variable, we shouldn’t work on it. Another issue was data. The available survey data earlier on had questions about people’s work hours, access to credit, what they were buying, but they didn’t have questions about people’s perceptions of themselves.

What changed?
The economists started saying: “Look, it doesn't reflect badly on us if we start taking ideas from psychologists and sociologists seriously.” And the data being produced has become richer and richer, in order to capture these cultural concepts.

So, have economics departments banished the hyper-rational model of human behaviour from their teaching?
The backbone of PhD programmes is still micro, macro and statistics. You do learn a lot of what you call the Homo economicus paradigm. But what economics has done after the financial crisis is to acknowledge the role of beliefs, and how beliefs can affect important phenomena. Understanding those beliefs must be at the centre of what we do.

You’re particularly interested in TV. Does it really have a big influence over how we live our lives?
This is something that in Brazil anthropologists had studied qualitatively, going to the Amazon and interviewing people who had been exposed to television programmes. This completely different way of life that people saw on the screen was inspiring in some ways, because they saw a much better standard of living. There are now studies that look at the influence of TV on domestic violence, teen pregnancies and crime, so there’s quite a lot that economists have done in recent years. TV seems frivolous, but we all know how much time people spend in front of these programmes. I never thought it wasn’t worth studying. I always thought it might be a powerful tool.

Some of your earlier research about lower trust in ethnically mixed communities might bolster the arguments of immigration sceptics. As someone who is politically liberal, how do you respond when your findings clash with your politics?
The work I’ve been doing recently looks at the role stereotypes play in people’s attitudes towards each other, and what happens when you make people aware they have these implicit stereotypes. In South Africa, for example, we’ve been looking at contacts between room-mates of a different race. We find quite encouraging messages there. I started from the gloomy picture that some of the data was showing, and then decided, look, there are benefits from diversity that people can realise – if they overcome misinformation or stereotypes.