Either "identity" is too vague or I don't understand how you're using it. There's no explanation of what an identity is, why or how people seek an identity, or why they would seek one instead of others.
An "identity" is a label attached to a set of personal attributes that signify membership in a subgroup, e.g. "A Spartan comes back with his shield or on it".
The subgroup can be political, familial, or other: "A Smith never backs down", "A Scout is always prepared", and "Big boys don't cry".
People seek to emulate identities they are attracted to -- i.e., ones with whom they feel they already have something in common, and which offer them something in return. (This latter bit is vague: the something in return could be the admiration of allies or the annoyance of enemies. E.g., being a punk rocker to piss off your parents.)
(And of course, these feelings of attraction aren't any more consciously thought out than sexual attraction is.)
"Village idiot" is an identity and "brilliant seeker of truth" is an identity, but most people, given the choice, would try to conform to the latter.
But not all people. A person whose natural talents are reinforced in that direction will likely end up there... see for example the "class clown".
Human beings tend to be different from one another because reinforcement leads to a positive feedback loop of increasing "talent" (i.e. skill) in being a particular personality type. People then try to "fit in" somewhere, even if the fit is a minority role of one.
"Living up to ideals" is a very human-level thought. Where's the mental circuitry behind it? Why would people want to live up to ideals, or even have ideals? What's my motivation?
I don't understand whether you mean "why" in an evolutionary sense, or "why" in the sense of "what causes it" (i.e. how).
I think you're entirely right about identity, but that identity is a high-level process that emerges out of the search for status. Exactly how is a whole other post, but I think a lot of the research you mention is in the fields of contingencies of self-worth, ie how our self-esteem comes from lots of different sources. We then value or devalue those sources in order to maximize our own self-esteem.
I think it's a mistake to use "status" as a single lump term for all these things. We don't directly perceive our "status" in an absolute sense, and status is in any case relative. I think the emotion that's relevant in this case is the one that some researchers refer to as "elevation" -- the opposite of disgust. We aspire to be like those who inspire us, and we feel pride in having an identity as a worthy member of a subgroup.
This is not the same thing as feeling that we have a high status within a subgroup, or within a larger group. Beware the Big Hammer. ;-)
While "self-esteem" certainly mirrors one's actual status feedback in part, it is not a direct measurement, nor is it exclusively based on status.
I think we more or less agree except on semantic issues, then. If I ever manage to continue this sequence, it'll become clearer whether we do or don't.
"Human nature 101. Once they've staked their identity on being part of the defiant elect who know the Hidden Truth, there's no way it'll occur to them that they're our catspaws." - Mysterious Conspirator A
This sentence sums up a very large category of human experience and motivation. Informally we talk about this all the time; formally it usually gets ignored in favor of a simple ladder model of status.
In the ladder model, status is a one-dimensional line from low to high. Every person occupies a certain rung on the ladder determined by other people's respect. When people take status-seeking actions, their goal is to to change other people's opinions of themselves and move up the ladder.
But many, maybe most human actions are counterproductive at moving up the status ladder. 9-11 Conspiracy Theories are a case in point. They're a quick and easy way to have most of society think you're stupid and crazy. So is serious interest in the paranormal or any extremist political or religious belief. So why do these stay popular?
Could these just be the conclusions reached by honest (but presumably mistaken) truth-seekers unmotivated by status? It's possible, but many people not only hold these beliefs, but flaunt them out of proportion to any good they could do. And there are also cases of people pursuing low-status roles where there is no "fact of the matter". People take great efforts to identify themselves as Goths or Juggalos or whatever even when it's a quick status hit.
Classically people in these subcultures are low status in normal society. Since subcultures are smaller and use different criteria for high status, maybe they just want to be a big fish in a small pond, or rule in Hell rather than serve in Heaven, or be first in a village instead of second in Rome. The sheer number of idioms for the idea in the English language suggests that somebody somewhere must have thought along those lines.
But sometimes it's a subculture of one. That Time Cube guy, for example. He's not in it to gain cred with all the other Time Cube guys. And there are 9-11 Truthers who don't know any other Truthers in real life and may not even correspond with others online besides reading a few websites.
Which brings us back to Eliezer's explanation: the Truthers have "staked their identity on being part of the defiant elect who know the Hidden Truth". But what does that mean?
A biologist can make a rat feel full by stimulating its ventromedial hypothalamus. Such a rat will have no interest in food even if it hasn't eaten for days and its organs are all wasting away from starvation. But stimulate the ventrolateral hypothalamus, and the rat will feel famished and eat everything in sight, even if it's full to bursting. A rat isn't exactly seeking an optimum level of food, it's seeking an optimum ratio of ventromedial to ventrolateral hypothalamic stimulation, or, in rat terms, a nice, well-fed feeling.
And humans aren't seeking status per se, we're seeking a certain pattern of brain activation that corresponds to a self-assessment of having high status (possibly increased levels of dopamine in the limbic system). In human terms, this is something like self-esteem. This equation of self esteem with internal measurement of social status is a summary of sociometer theory.
So already, we see a way in which overestimating status might be a very primitive form of wireheading. Having high status makes you feel good. Not having high status, but thinking you do, also makes you feel good. One would expect evolution to put a brake on this sort of behavior, and it does, but there may be an evolutionary incentive not to arrest it completely.
If self esteem is really a measuring tool, it is a biased one. Ability to convince others you are high status gains you a selective advantage, and the easiest way to convince others of something is to believe it yourself. So there is pressure to adjust the sociometer a bit upward.
So a person trying to estimate zir social status must balance two conflicting goals. First, ze must try to get as accurate an assessment of status as possible in order to plan a social life and predict others' reactions. Second, ze must construct a narrative that allows them to present zir social status as as high as possible, in order to reap the benefits of appearing high status.
The corresponding mind model1 looks a lot like an apologist and a revolutionary2: one drive working to convince you you're great (and fitting all data to that theory), and another acting as a brake and making sure you don't depart so far from reality that people start laughing.
In this model, people aren't just seeking status, they're (also? instead?) seeking a state of affairs that allows them to believe they have status. Genuinely having high status lets them assign themselves high status, but so do lots of other things. Being a 9-11 Truther works for exactly the reason mentioned in the original quote: they've figured out a deep and important secret that the rest of the world is too complacent to realize.
It explains a lot. Maybe too much. A model that can explain anything explains nothing. I'm not a 9-11 Truther. Why not? Because my reality-brake is too strong, and it wouldn't let me get away with it? Because I compensate by gaining status from telling myself how smart I am for not being a gullible fool like those Truthers are? Both explanations accord with my introspective experience, but at this level they do permit a certain level of mixing and matching that could explain any person holding or not holding any opinion.
In future posts in this sequence, I'll try to present some more specifics, especially with regard to the behavior of contrarians.
Footnotes
1. I wrote this before reading Wei Dai's interesting post on the master-slave model, but it seems to have implications for this sort of question.
2. One point that weakly supports this model: schizophrenics and other people who lose touch with reality sometimes suffer so-called delusions of grandeur. When the mind becomes detached from reality (loses its 'brake'), it is free to assign itself as high a status as it can imagine, and ends up assuming it's Napoleon or Jesus or something like that.