What Is the Economic Man? - Concept, Assumptions & Constraints

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  • 0:01 Who's the Man?
  • 0:51 What Can the Man Do?
  • 2:29 He's Only (the Economic) Human
  • 3:57 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught history, and has an MA in Islamic law/finance. He has since founded his own financial advice firm, Newton Analytical.

Just because the Economic Man doesn't exist doesn't mean that he's not important. This lesson explains how the Economic Man is really quite useful to economists for a variety of reasons.

Who's the Man?

As a child, you may have had an imaginary friend. If you don't believe you did, ask your parents - chances are they'd invent one just to embarrass you. However, economists never really grow up in that respect, as they still have imaginary friends... well, one imaginary friend. Known as the Economic Man, this hypothetical human has it all. It's a good thing he does, too, as economists depend on him.

Economists assume that the Economic Man will act in the most rational way possible in order to maximize his utility. Sometimes called Homo economicus, there is no reason in the world that your ideal economic human can't be a woman - it's just that this idea goes back before the idea of gender equality.

What Can the Man Do?

But what does the Economic Man do? In short, he acts rationally in a given economy. By 'rationally,' I mean with regards to economic norms, not social ones. Make no doubt about it, the Economic Man is selfish and always is out for himself first. When acting as a producer, he seeks to maximize profits.

However, where the Economic Man really shines is as a consumer. It is through the Economic Man that economists are able to figure out with some degree of certainty more information about that crucial economic concept of utility. After all, the Economic Man can consume anything that someone in society would want to consume. However, it's through allowing the Economic Man to experience needs that his real talents come into play. Since the Economic Man is selfish, we know that he will seek to take care of himself first.

While all this sounds basic enough, it does allow economists to build rather sophisticated models, or examples of how a proposed economic change would play out on a smaller scale. In doing so, they just have to answer the question what would the Economic Man do? If given a finite amount of resources, we know that the Economic Man will seek to take care of himself first without regard to anything except personal utility, which is precisely what economists expect that humans will do. Just as you could make your imaginary friend switch from having a tea party to playing with cars, so too can economists switch gears on the Economic Man.

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