Wednesday, September 25, 2013

'Homo economicus': Economic Man or Straw Man?

Stuart K. Hayashi

Economic illiterates say that free-market economists have an unrealistic conception of human nature, which the economic illiterates dub Homo economicus (meaning Economic Man).  Homo economicus is said to have no empathy and to act only for his own gain, particularly in monetary terms. Homo economicus doesn't care about his family or about non-monetary gains, such as prestige, snob appeal, or a sense of familial warmth.

Here's the thing: Homo economics is a straw man. No free-market economist, not even a utilitarian like Jeremy Bentham, argues that humans only seek to maximize profit that can be measured in terms of monetary units. What economists call utility refers to ALL values humans seek -- love, affection, respect, a sense of safety, etc., and this includes values that are not measured in terms of monetary units.

Critics who accuse economists of fixating on such an unrealistic image of human nature as Homo economicus are actually the ones who fixate on an unrealistic image of economists.