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Homo economicus
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Homo economicus
The term Homo economicus, or economic man, is the portrayal of humans as agents who are consistently rational and narrowly self-interested, and who pursue their subjectively defined ends optimally. It is a wordplay on Homo sapiens, used in some economic theories and in pedagogy.
In game theory, Homo economicus is often (but not necessarily) modelled through the assumption of perfect rationality. It assumes that agents always act in a way that maximize utility as a consumer and profit as a producer, and are capable of arbitrarily complex deductions towards that end. They will always be capable of thinking through all possible outcomes and choosing that course of action which will result in the best possible result.
The rationality implied in Homo economicus does not restrict what sort of preferences are admissible. Only naive applications of the Homo economicus model assume that agents know what is best for their long-term physical and mental health. For example, an agent's utility function could be linked to the perceived utility of other agents (such as one's husband or children), making Homo economicus compatible with other models such as Homo reciprocans, which emphasizes human cooperation.
As a theory on human conduct, it contrasts to the concepts of behavioral economics, which examines cognitive biases and other irrationalities, and to bounded rationality, which assumes that practical elements such as cognitive and time limitations restrict the rationality of agents.
The term "economic man" was used for the first time in the late nineteenth century by critics of John Stuart Mill's work on political economy. Below is a passage from Mill's work that critics referred to:
[Political economy] does not treat the whole of man's nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end.
Later in the same work, Mill stated that he was proposing "an arbitrary definition of man, as a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained."
Adam Smith, in The Theory of Moral Sentiments, had claimed that individuals have sympathy for the well-being of others. On the other hand, in The Wealth of Nations, Smith wrote:
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Homo economicus
The term Homo economicus, or economic man, is the portrayal of humans as agents who are consistently rational and narrowly self-interested, and who pursue their subjectively defined ends optimally. It is a wordplay on Homo sapiens, used in some economic theories and in pedagogy.
In game theory, Homo economicus is often (but not necessarily) modelled through the assumption of perfect rationality. It assumes that agents always act in a way that maximize utility as a consumer and profit as a producer, and are capable of arbitrarily complex deductions towards that end. They will always be capable of thinking through all possible outcomes and choosing that course of action which will result in the best possible result.
The rationality implied in Homo economicus does not restrict what sort of preferences are admissible. Only naive applications of the Homo economicus model assume that agents know what is best for their long-term physical and mental health. For example, an agent's utility function could be linked to the perceived utility of other agents (such as one's husband or children), making Homo economicus compatible with other models such as Homo reciprocans, which emphasizes human cooperation.
As a theory on human conduct, it contrasts to the concepts of behavioral economics, which examines cognitive biases and other irrationalities, and to bounded rationality, which assumes that practical elements such as cognitive and time limitations restrict the rationality of agents.
The term "economic man" was used for the first time in the late nineteenth century by critics of John Stuart Mill's work on political economy. Below is a passage from Mill's work that critics referred to:
[Political economy] does not treat the whole of man's nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end.
Later in the same work, Mill stated that he was proposing "an arbitrary definition of man, as a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained."
Adam Smith, in The Theory of Moral Sentiments, had claimed that individuals have sympathy for the well-being of others. On the other hand, in The Wealth of Nations, Smith wrote: