  Social and political polarization is a significant source of conflict and
poor governance in many societies. Thus, understanding its causes has become a
priority of scholars across many disciplines. Here we demonstrate that shifts
in socialization strategies analogous to political polarization and identity
politics can arise as a locally-beneficial response to both rising wealth
inequality and economic decline. Adopting a perspective of cultural evolution,
we develop a framework to study the emergence of polarization under shifting
economic environments. In many contexts, interacting with diverse out-groups
confers benefits from innovation and exploration greater than those that arise
from interacting exclusively with a homogeneous in-group. However, when the
economic environment favors risk-aversion, a strategy of seeking low-risk
interactions can be important to maintaining individual solvency. To capture
this dynamic, we assume that in-group interactions have a lower expected
outcome, but a more certain one. Thus in-group interactions are less risky than
out-group interactions. Our model shows that under conditions of economic
decline or increasing wealth inequality, some members of the population benefit
from adopting a risk-averse, in-group favoring strategy. Moreover, we show that
such in-group polarization can spread rapidly to the whole population and
persist even when the conditions that produced it have reversed. Finally we
offer empirical support for the role of income inequality as a driver of
affective polarization in the United States, mirroring findings on a panel of
developed democracies. Our work provides a framework for studying how disparate
forces interplay, via cultural evolution, to shape patterns of identity, and
unifies what are often seen as conflicting explanations for political
polarization: identity threat versus economic anxiety.
