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Homo economicus, or Economic man, is a term used for an approximation of Homo sapiens that acts to obtain the highest possible well-being given available
information about opportunities. This approach has been formalized in certain social science models, particularly in certain economic
models.
As in social science in general, these assumptions are at best approximations. The term is often used derogatorily in academic
literature, perhaps most commonly by sociologists, who tend to prefer structural
explanations to ones based on rational action by individuals.
Homo economicus bases his choices only the consideration of his own personal "utility function". To the extent that this utility function does not consider the well-being of others,
Homo economicus is selfish. Some believe such assumptions about humans are unethical. Economists tend to disagree, arguing that
it may be relevant to analyze the consequences of enlightened egoism just as it may be worthwile to consider altruistic or social
behavior.
How is Homo economicus rational? Usually in the sense that well-being as defined by the utility function is optimzed given
perceived opportunities. See Rational Choice Theory and
Rational expectations for further discussion; the article
on Rationality widens the discussion.
The Austrian School criticise homo economicus as an actor for
economic forecasting. They stress uncertainty in the making of economic decisions, rather than relying on the rational man who is
fully informed of all circumstances impinging on his decisions. They argue that perfect knowledge never exists, means that all
economic activity implies risk.
Many critics of the dominant neo-classical economics use "Homo economicus" as a straw man target. "Real people do not have
cost-less access to infinite information and an inbuilt ability to process it, in no time at all." However, at advanced level
economics, scholars have found ways of acknowledging these facts. When looking at some of the advanced work in the field HE is
modified enough to be a realistic picture of some decision making, and the critics are targeting a straw man. It is primarily
when targeting the limiting assumptions made in constructing undergrad models that the criticisms are valid.
Comparisons between economics and sociology have resulted in a corresponding term Homo sociologicus, to
parody the image of human nature given in sociological models. Hirsch, Michaels, and Friedman (1990, p. 44) say that homo
sociologicus is largely a tabula rasa upon which societies and cultures write values and goals; unlike economicus,
sociologicus acts not to pursue selfish interests but to fulfill social roles. Sociologicus may appear all society and no
individual.
See also:
References
- Hirsch, Michaels, and Friedman (1990). "Clean Models Versus Dirty Hands: Why Economics is Different From Sociology". pp.
39-56 in Zukin and DiMaggio (Eds.), Structures of Capital: The Social Organization of the Economy. Cambridge: Cambridge
University Press.
External link
http://www.korpios.org/resurgent/L-homoeconomicus.htm, which
simultaneously explains and debunks economic models based on Homo Economicus, claiming that such models serve the political
interests of more conservative economists.
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