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What is the Economic Man?

Tommy Watts, Kevin Newton
  • Author
    Tommy Watts

    Tommy Watts has taught college level economics for over one year and they have a degree in Economics from the University of Delaware. They have also worked as a professional economist for over three years. They are passionate about helping students achieve their best in school.

  • 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.

Learn about the homo economicus. Identify the characteristics of the economic man, read a definition of homo economics, and examine the criticisms of this theory. Updated: 06/22/2022

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What is the Economic Man?

The economic man is defined as a metaphorical human with a limitless capacity for logical decision-making. It is also termed as homo economicus. Humans, are relatively rational beings that seek to maximize their utility, both financially and otherwise. Economic theory is predicated on the premise that the economic man will make the best use of his resources by acting rationally at all times. As a result, they fall under the category of someone who is inherently sensible when faced with economic challenges. According to the economic man theory, all people are driven entirely by self-interest, which implies they will always want to increase their financial security at whatever cost. Adam Smith was the first to bring the concept of the rational economic man in economics to the public's attention. With regard to the pursuit of self-interest leading to an efficient end, Adam Smith explored this in his book The Wealth of Nations. Smith's more nuanced view on the topic may be seen in Theory of Moral Sentiments, in which he hoped that people would follow ''nobler objectives than self-interest.''

John Stuart Mill, an English civil servant, philosopher, and economist, used the phrase "homo economicus" in an 1836 political economy book. The focus of Mill's research was a "person who wishes to own riches and who is capable of evaluating the relative efficacy of actions to achieve that objective." Political economy, he said, only considers those factors that aid a hypothetical person in their pursuit of wealth.

Characteristics of the Economic Man

In economics, self-interested goals and rational choice of means are typical characteristics. For a long time, economics has relied heavily on the idea that economic men are always looking out for their own best interests. Furthermore, they are always in a position to make judgments that allow them to achieve this aim in the most effective manner possible. As a consumer, the homo economicus seeks to maximize value; as a producer, the homo economicus aims to maximize profit. Homo economicus is characterized by several additional characteristics, including a desire to maximize profits. Fake rationality, boundless intellectual ability, perfect knowledge, narrow self-interest, and preference consistency are among the characteristics of an economic man.

The homo economicus's decision-making is completely objective and unaffected by personal biases. Furthermore, the mind of the homo economicus is capable of processing any amount of data, regardless of its quality, quantity, or complexity. A further advantage of the homo economicus is that it has full access to all the data it needs to come to a decision. The homo economicus has a narrow sense of self-interest and is just interested in what is best for himself or herself. As a final point, the homo economicus's preferences and purposes stay the same throughout history.

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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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Frequently Asked Questions

Who gave the concept of economic man?

According to the economic man theory, all people are driven entirely by self-interest, which implies they will always want to increase their financial security at whatever cost. An English civil servant, economist and philosopher named John Stuart Mill used the term "homo economicus" in an 1836 treatise on politics. However, Adam Smith was the first to bring it to the public's attention.

Is homo economicus accurate?

Psychological and behavioral economic studies have proven that the homo economicus paradigm has numerous flaws. To put it simply, humans aren't flawless at making decisions and care about more than just maximizing usefulness and profit.

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