Homo economicus: what it is and how it explains human behavior

Although our species is Homo sapiens, in certain contexts a different expression has begun to be used.

We are going to know what the term homo economicus implies, in what field was this concept developed and what is the sense of using it to refer to our species and the evolutionary moment in which we find ourselves. For this we will review everything related to this name.

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What does homo economicus mean? Concept history

The concept of homo economicus, originally written as homo œconomicus, means, in Latin, economic man. Obviously, it is an expression that unifies the genus of our own species, homo, of Homo sapiens, also including the term referring to the economy, since arises from contexts such as game theory, where this homo economicus would be a totally rational being, that with his actions always seeks the maximum benefit through the minimum effort.

It is a term coined in the 19th century by John Stuart Mill, one of the leaders of the classical economic school. Mill speaks of homo economicus within the context of political economy and how man makes his decisions about A way that evaluates their costs and benefits so that the latter are always as high as possible. However, even if he named it, in reality this concept already existed before.

The first economist to speak on this question was none other than Adam Smith, who in his masterpiece, The Wealth of Nations, already mentions the rationality of the human being in matters that concern our behavior in an economical way and how we thus try to achieve the most satisfactory result in exchange for the least loss of resources. With which we could affirm that the concept of homo economicus was actually born in the year 1776.

Delving into that question and returning to J. S. Mill, this author argues that we should not confuse the actions of people who, in the exercise of their profession, give the possibility to other people to obtain products or services, with a mere act of goodness. In that sense, the fact that a craftsman provides us with clothes or that a doctor treats us and heals us does not mean that they are good by nature, but that they are looking for a benefit.

In fact, this statement connects with the writings of a much older author, one of the most important philosophers in history: Aristotle. Almost 4 centuries before Christ, this Greek philosopher had already realized that it was natural for men to have an interest in getting money, among other things, because thanks to him and the individual property derived from him, they had the ability to help their loved ones, such as their own family or their friends.

As we can see, the idea of ​​the concept of homo economicus had already existed for a long time, but it was with the arrival of the nineteenth century that court economists neoclassical they captured it in a scientific way, that is, through mathematical models that allowed to explain and predict this form of behavior so human. Authors such as William Stanley Jevons, Marie-Esprit-Léon Walras, Francis Ysidro Edgeworth and Vilfredo Federico Damaso Pareto stand out.

Already in the twentieth century, economist Lionel Charles Robbins created rational choice theory, an approach that had just crystallized the essence of homo economicus and provided it with the final definition: the man whose behavior is moved by reasoning taking into account their own interests, among which are the desire to obtain benefits (money or earnings from some kind).

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The homo economicus model

After the historical tour carried out, we already know in depth the meaning of homo economicus. We have seen that the essence behind this term had already been the object of thought since ancient times. However, it has been in recent history (19th and 20th centuries) when it has finally been embodied in mathematical and more specifically economic models.

According to the approaches of the authors who work with the term, they always establish the premise that homo economicus will try to achieve the highest possible well-being, always calibrating both the opportunities available to it and those difficulties that are given by the environment in which it finds itself, including the administrations that economically govern the system.

As we anticipated in the previous point, this behavior must be rational, since this is how the individual manages to optimize that obtaining of well-being (it will achieve the maximum and at the same time it will try to spend the least part of the resources of which has). Rationality, therefore, will be limited to the function of achieving the best result.But it does not mean that the end sought is rational in itself.

It is important to make this distinction, since otherwise we would be affirming that homo economicus will always know in some way what are the objectives that he must pursue in depending on how beneficial they will be for him in the long term, when it is evident that in many cases there is no rational way to reach that conclusion because we do not have the information enough.

Limitations of this concept

Although the concept of homo economicus has had a long journey and we have even seen that on a historical level this idea was talked about many centuries ago, it is a model which has certain limitations and that has made it the target of different criticisms from authors who reject the foundations of this model, either totally or completely. partial. Let's see some of them.

1. Criticism from anthropology

One of the most important comes from the field of anthropology. Authors who study both this discipline and economics are in a position to make an important critique of the concept of homo economicus. For them, a fundamental issue that has not been taken into account is that the decisions of the individual vary significantly depending on the society in which he lives and therefore according to the values (also economic and social) in which you have grown up and that you consider as your own.

It is the position of authors such as Karl Polanyi, Maurice Godelier, Marshall Sahlins or Marcel Mauss, all of them anthropologists and economists who set the example of more court cultures. traditional in which all economic decisions are made, not according to the benefit that the individual obtains, but under the principle of reciprocity between the two parts. That is, it is intended that both achieve an equivalent benefit.

2. Criticism from the Austrian School

Another of the main criticisms of the homo economicus model comes in this case from another economic school, the Austrian one. They put on the table the question of the supposed omniscience of the individual, which according to the approach that we saw previously, he would always know what was the option that the Bigger benefit.

It is evident that this is not always the case and that rarely do we have complete knowledge of all the repercussions of an action. Therefore, to affirm that the subject will always make the decision that brings him the greatest gains would be something too naive and would also have a significant bias.

Therefore, it is essential to assess the information available to the individual at all times in order to know what has based his behavior.

3. Criticisms from psychology

Similarly, from the field of psychology, thoughts have arisen that question the validity of the homo economicus model. For example, Israeli authors Daniel Kahneman and Amos Tversky, experts in behavioral economics, claim that This model leaves out a key question for all decision making: the way in which it is posed to the individual.

For Tversky and Kahneman, almost as important as the profit to be obtained, is the perception that the subject has about the possible losses and gains that he will have in the operation. They start from the assumption that people, as a rule, prefer not to lose than to win. Therefore, simply the statement that we make to a person to choose between two options, can make them lean towards one or the other, according to our words.

Therefore, if we ask a person the choice between option A or option B, but in one case we do it putting the emphasis on the possibility of losing if you choose A and in another on the option of not winning if you choose B, we can make the choice of him change radically, the options being identical in both cases.

This would, therefore, be the third major criticism that the homo economicus model has received and for which have been proposed another series of models to try to fill these deficiencies and thus contemplate more variables.

Bibliographic references:

• Kahneman, D., Tversky, A. (2013). Prospect theory: An analysis of decision under risk. Handbook of the fundamentals of financial decision Making.
• Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E., Gintis, H., McElreath, R. (2001). In search of homo economicus: behavioral experiments in 15 small-scale societies. American Economic Association.
• Persky, J. (1995). The ethology of homo economicus. Journal of Economic Perspectives.
• Thaler, R.H. (2000). From homo economicus to homo sapiens. Journal of economic perspectives.