Who is economic man?

A provocative opening to this article attacking something called “economic man”:

“Myth: Homo economicus is a valid assumption of human behavior.
Fact: Homo economicus is a fiction useful to right-wing economists.”

“Economic man” would be too easy, of course; “Homo economicus” sounds more intellectual and somehow also more ridiculous. Anyway, if I pretend not to see the right-wing bit – what’s a right-wing economist? – I think the fact is a fact and the myth is a fact too, and not just because defining a “valid assumption” is not quite as obvious as it seems.

The essay is actually pretty interesting, though obviously normatively motivated. It goes on to say:

“Specifically, social scientists believe that human behavior is often complex, imperfect, limited, self-contradictory and unpredictable. Homo economicus, however, is a greatly simplified model which assumes that individuals possess the following traits:

* Perfect self-interest
* Perfect rationality
* Perfect information”

I love that “human behavior is…. unpredictable”; the logical conclusion of that argument would be to abandon all social science, would it not? Let’s take the long view and ignore that bit. Aside from that, as I’ve argued before, the perfect information trait has been scrutinized intently for a few decades, so it’s probably an obsolete criticism. The rationality bit is, again, untestable, since what we mean by rationality is that some pattern that’s to some degree predictable – whatever it might be – affects behavior.

The self-interest trait is the one that comes in for a lot of criticism, in the essay and generally. The most important myth to dispel right away is that “self-interest” means “cares only about things that materially affect me”; it means “cares only about things that I care about”, which is delightfully tautological and more innocuous. We have a special definition of “selfish”. I think what the critic really means is more in the spirit of the following, from Wikipedia (sorry):

“Economic man is also amoral, ignoring all social values unless adhering to them gives him utility. Some believe such assumptions about humans are not only empirically inaccurate but unethical.”

There are two problems with that: one is the use of “unethical”, which I’ll save for another day, and the second is methodological. It’s possible to write down a rational, self-interested “economic man” who will do anything. Literally anything can be “rationalized”; it’s meaningless to say that it’s “empirically inaccurate” to assume that “social values” give a person utility, because it’s impossible to empirically answer that question one way or another. Economists seeking accuracy would, methodologically, model a person who acted in accordance with social values as if that person got utility from conforming to social values. Our rational, self-interested man has magically developed a social conscience!

Later in the original article, the author says (in direct contradiction to their earlier claim that behavior is unpredictable, by the way):

“Biologists recognize four levels of survival: the gene, the individual, the group, and the specie. All of them interact to produce the complex and often paradoxical behavior we witness in humans. The error of Homo economicus is that it focuses only on one level: the individual. It cannot explain why couples bear children (to promote genetic survival), or why soldiers often sacrifice their lives in war (to promote group survival), or why people practice charity (to promote human survival).”

Again, I can only plead that we recognize that whatever economists do or are perceived to do, their method of modeling people can explain anything, and I mean that as both a criticism and a compliment. Our method is neutral, our method is empty. Attack the normative interpretation of our conclusions. Attack the assumptions we make. Don’t attack the method: you’re shooting at thin air.

Let’s do a thought experiment: imagine we had a super-supercomputer that could accommodate all the complexity we wanted, and imagine that our computer has also figured out how to perfectly model every single human being, and imagine that we believe it. Forget the fatalist implications and just ask: would an economist – who seeks to model choice and the allocation of scarce resources, to describe the world, to make predictions, and, ultimately, to inform – reject the computer? Would he reject the model? If he would, he is not a scientist: if the economist would reject it, then I’ll let all the critics of economics attack him, because surely the only way to justify rejection of that gift would be because the model would generate predictions that the economist didn’t like.

Economists should never make their “economic man” to suit their ideological goals. That’s not science. We must make our “economic man” realistic but clear, acknowledge what he does and does not do, what he does and does not embody. He can be anything we want: we are therefore powerful, and must then be honest, if nothing else.

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