Homo economicus, or "economic man," is the characterization of man in some economic theories as a rational person who pursues wealth for his own self-interest. The economic man is described as one who avoids unnecessary work by using rational judgment. The assumption that all humans behave in this manner has been a fundamental premise for many economic theories.

However, many behavioral economists disagree with this theory, noting that humans tend to be irrational in their decision-making, and anticipating irrational behavior when it comes♈ to man and economic decisions is mo🐬re useful for economic modeling.

Understanding Homo Economicus

The history of the term dates back to the 19th century when 澳洲幸运5官方开奖结果体彩网:John Stuart Mill first proposed the definition of 澳洲幸运5官方开奖结果体彩网:homo economicus. He defined the economic actor as one "who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labor and physical self-denial with which they can be obtained."

He discussed the term in an 1836 essay titled "On the Definition of Political Economy, and on the Method of Investigation Proper to It". His essay argued that the political economy removes other human desires, except those that help the political person pursue wealth.

The idea that man acts in his own economic self-interest often is attributed to other economists and philosophers, like economists 澳洲幸运5官方开奖结果体彩网:Adam Smith and 澳洲幸运5官方开奖结果体彩网:David Ricardo, who considered man to be a rational, self-interested economic agent, and Aristotle, who discussed man's self-interested tendencies in his work "Politics." But Mill is considered the first to have defined the economic man completely.

Criticisms of the Theory

The theory of the economic man dominated classical economic thought for many years until the rise of formal criticism in the 20th century from economic anthropologists and neoclassical economists. One of the most notable criticisms can be attributed to famed economist 澳洲幸运5官方开奖结果体彩网:John Maynard Keynes. He, along with several other economists, argued that humans do not behave like the economic man. Instead, Keynes asserted that humans behave irrationally.

He and his fellows proposed that the economic man is not a realistic model of human behavior because economic actors do not always act in their own self-interest and are not always fully informed when making economic decisions.

Although there have been many critics of the theory of homo economicus, the idea that economic actors behave in their own self-interest remains a fundamental basis of economic thought.

The Bottom Line

The idea of homo economicus plays a role in economic theory, stating that man makes rational decisions i♏n the pursuit of wealth, avoiding unnecessary work; however, in modern economic theory, econo꧃mists believe that man makes irrational decisions. These decisions include impulsive decisions, risky decisions, and failure to consider the long-term consequences of actions. Attempts at modeling these decisions and how they affect the economy encompass behavioral economics.