The Unspoken Assumption in Economics

In an effort to make economics more scientific, the adoption of quantitative methods may have led many to ignore the more qualitative factors that could lead to economic prosperity. One such factor is the sense of ‘nationhood.’

The nation and society

The field of economics has the habit of reducing humans to ‘Homo Economicus’ – rational and self-interested beings, bereft of personality, identity, history, and community. This is done not out of ignorance but for convenience. For the most part, the models built on such assumptions tend to be right. However, many of these models operate under an implicit assumption that there is a functioning society that serves as a base for an economy.

The tapestry of individuals that makes a greater whole in the form of a society should be paid more attention to, for they are not always conducive to economic activity. The identity, culture, attitudes, and politics of its members or groups contribute to the success, or failures, of economic activities too – beyond individual rationality and self-interest. 

This piece will explore the sense of nationhood and patriotism within society, and how it may help contribute to economic prosperity.


Unity and imagined community

A nation is a socially constructed community, imagined by the people who view themselves as part of it, usually formed by something that unites the group – be it language, ideology, history, territory or religion. By being part of this group, total strangers are turned into part of imagined extended family or kin. The devotion and support for one’s country are called patriotism, and contributes to the extension of empathy to strangers within one’s group; it enables people of a common national identity to seek to improve each other’s welfare, demanding the best for their fellow men. Think of it as one of many factors that helps bind modern society together.

The lines between nationalism and patriotism are often blurred, with the former having the worse reputation between the two. With this in mind, for this piece, patriotism will mean the feeling of unity and devotion to a group beyond those of family ties, concerning itself with what is within the group, not outside of it, and nationalism is the feeling that one’s group is superior to the other. However, the distinction is arbitrary, and both are capable of harm. 

Readers are right to be sceptical of the benefits of patriotism, but it is not inherently malevolent nor good, it just is. To dismiss it would be unhelpful to understanding how people work, for the overwhelming majority of humanity believe they belong to a nation and are patriotic.


Peace and trust

For this piece, let us imagine a nation-state, a state governed by and representing a single nation. To reemphasize, a nation need not be defined by factors such as ethnicities, language, or religion. People of different ethnicities, language, or religion could theoretically be of the same nation, as long as they imagined themselves as being of the same community. For instance, an Irish New Yorker and a Latino Texan may never meet each other, but by imagining themselves as Americans, they both are part of the American Nation.

For a nation-state to succeed economically, its society must be both peaceful and trustful; it is peace that gives its people the stability to plan and to build their wealth, and it is trust that enables transactions to take place. 

Multiple fields in economics concern themselves with designing proper incentives to encourage peace and trust. This ranges from constructing a better judiciary system to building up a police force to discourage acts that undermine peace and trust in society. While those institutions certainly matter, how often does one think of them when going about one’s daily life? We (hopefully) do not fill ourselves with violent thoughts and are only discouraged to act upon them because the police and the law exist.

We have to take into account other aspects of human nature. Most notably, our ability to feel guilt for hurting ‘our people,’ and the desire for what is best ‘for our people’. ‘Our people,’ in this context, can be applied to family and friends. While it is true that there is a lot of conflict one can have with them, there is a tendency towards empathy and altruism. This is not to say that empathy and altruism are exclusively reserved towards a small group of family and friends, they can always be extended to those in the out-groups, but may be accompanied by suspicion, which could lead to conflict. 

Patriotism extends this ‘familial’ empathy and altruism to total strangers of a common identity. The feeling of ‘familial ties’ and the guilt of hurting each other makes individuals less likely to conflict with each other, contributing to peace. This also extends to the realm of economics: ‘hurt’ now comes in the form of stealing, breaking of one’s contract, and scamming; individuals would be hesitant to commit such acts, especially when the potential victims are seen to be ‘one of their own.’ This provides for some degree of certainty in transactions, creating a foundation in trust, contributing to the smooth functioning of the economy.

Killings and stealing will still happen. But patriotism – or at least the empathy and altruism it inspires – makes cases of them outliers. It makes possible a peaceful and trustful society, it makes people more likely to hesitate and avoid doing terrible acts on total strangers, not because it is the rational thing to do, but because they see it as the wrong thing to do.


Corruption and the plunder of the state

Aside from the institutional checks and balances in our theoretical nation-state, patriotism could contribute towards a less corrupt government. Corruption – the act that undermines the impartiality of institutions – is inherently selfish behaviour. It involves the abuse of public office to enrich oneself at the expense of others by the appropriation of resources meant for the public good for private benefits. 

If public officials are unpatriotic and see themselves as detached from the people, they may be more prone to use the state to selfishly benefit themselves. Institutions such as the judiciary and law enforcement that were meant to serve the people may be used to abuse the people. This means passing biased judgements against critics of the powerful and clamping down heavily on dissidents. They may also be less likely to invest in the country’s education and infrastructure as they do not benefit them directly.

If public officials are highly patriotic, they should be more sensitive to the damage they are doing to the society of their theoretical nation-state. The desire to do right by their people will mean that officials are less prone to abuse their station. This may motivate them to build and maintain a set of institutions to benefit the people, instead of themselves. It would mean actively investing in their people’s future, not filling up their own pockets.


Weakened patriotism, rivalling nationalisms

Readers may have noticed the context of the arguments is time and time again emphasized to be within an imaginary nation-state. Human identity is a mess, and it is possible to be patriotic to more than one imagined community, with different degrees of weight on each. A more realistic model of a nation-state would be one where individuals are more loyal and patriotic towards the national identity, compared to other ‘nations’ they belong to. For instance, an Irish American may imagine themselves as first and foremost American, a catholic second, and Irish third; with patriotism and loyalty overwhelmingly for the American people, though still have some attachment with their Irish heritage.

The reason why this needs to be specified is that depending on whom one considers their people, the loyalty and devotion towards a group one usually associates with patriotism can lead to conflict and widespread corruption. 

As an exercise, let us imagine a country consisting of multiple ‘nations’, its people(s) loyal and nationalistic (more appropriate to use this term instead of patriotism) to their imagined nation first, their real country second. Francis Fukuyama found an example in the case of Kenya. After gaining independence, the ethnic groups which make up the Kenyan people failed to imagine themselves as fellow citizens, instead viewing the other groups as competitors. The state was seen as something to be captured to redistribute resources among one’s ethnic groups. Those in public offices discriminate against those of different ethnicity and give favouritism to ‘their people’. Kenyan politics thus centred around a zero-sum game between the country’s ethnic groups to grab public offices and state resources. This encouraged hostility and distrust among Kenyans, culminating in mass killings in the 2007 presidential election. 

The lack of strong, united Kenyan patriotism contributed to the emergence of rivalling nationalisms within its borders. This contributed to corruption, instability, violence, and volatile economic growth.

An important note to point out is that it is the groups that were selfishly competing with each other. Its members are altruistically helping ‘their people,’ albeit through corruption, and tragically at the expense of others.


This piece does not argue that patriotism is the only thing keeping a country from the total breakdown of society and governance, but it certainly contributes to maintaining peace and trust possible for economic development on a national scale. The arguments presented are here certainly incomplete: international trade, for instance, is possible without each party seeing the others as ‘one of their own,’ and it may not even be appropriate to call ‘the sense of togetherness of an imagined community/nation, empathy towards it, and the advocacy of its interest’ patriotism.

It also does not claim to upend an entire field of social science; these are merely the musings of someone deeply passionate about this. 

It does, however, advocate for a more ‘qualitative’ look into the subject. Reason is a slave to the passions: an in-depth look into the emotional and non-rational aspect of people, and how it translates to the socio-economic condition of the wider world can only enrich us.

Written by Yap Per Hung