Thanks for the comments, Aakash.
My intuition is that people (implicitly) ascribe utility to choice that embodies an identity, and so modify the trade-off as it would have been without identity. (This can be positive or negative, e.g. I could choose to buy an unreliable British-built Rover over a more reliable German-built VW because ‘buy British’ has a lot of positive significance to me; or I can reject any German-built car, even though it otherwise represents excellent value-for-money, because of its negative connotation, because a relative perished in a German concentration camp during the war.)
But identity can develop into dogma, and that is where identity politics begins. At this point, it ceases to be a rational trade-off, and a single dimension begins to dominate the choice. A metaphor I considered using in my article is that of how one might treat members of one’s family: for example, imagine you have the choice between attending a concert by your favourite singer, but on the same day, your brother/sister/son/daughter… performs at your local community centre. Your favourite singer is much more skilled, performs your favourite songs in a thrilling show — and yet, most people will ‘make the sacrifice’ of going to see and support their relative. The difference in quality no longer matters: the family ties dominate the decision.
Some people sometimes make political decisions on the basis of such identity-based allegiances, rather than by rationally evaluating the substance behind the manifestos — arguably, few people actually make rational decisions: at the very least there are heuristics at play: the British Conservative party seeks to lower taxes or the Labour party always takes the side of the working class. Neither are necessarily always true, but they are strong heuristics in many voters’ minds.
More rational politics would encourage people to consider the issues, and work out the trade-offs from their viewpoint. But I don’t think that is very realistic: in politics even more than in markets people are guided by such beliefs and heuristics, and that includes their sense of identity. In the UK’s EU-referendum, many sources argue that a considerable part of the ‘Leave’ vote was inspired by identity politics — people voting against the metropolitan elite that has too long neglected their concerns about joblessness, low wages and poor public services, all of which are associated with immigration.
I don’t think we will ever see the disappearance of identity politics: politicians find an easy, willing audience for simple, polarizing, identity based messages.