What is the Economic Man?

In order to better comprehend human behavior in the context of economic activity, economists have come up with the notion of the economic man. In an economy, the economic man serves as both a producer and a consumer. Economic behavior, such as consumer choice, labor supply, and financial decisions can be explained by the economic man theory. In a given economy, the economic man behaves logically. The economic man is, without a doubt, self-centered and always puts his interests above those of others. A producer's primary goal is to maximize profit. However, it is as a consumer that the economic man truly excels. Economists are able to gain some insight into the economic idea of utility through the use of the economic man model. The economic man, after all, can consume whatever a member of society desires. It is only when the economic man is able to experience his wants that his true talents are unleashed. The economic man is selfish. Therefore, we may expect him to prioritize his own needs first. Economists can use this information to develop more complex models or examples of how a proposed economic reform would work on a smaller scale, even though it appears simple. The economic man will prioritize his own needs over the needs of others if resources are limited, just as economists predict people will do when faced with scarcity.

Criticisms of the Economic Man Theory

The better the model performs, the more accurate the input is. In other words, the economic man can properly forecast how people will react to a given stimulus if the information in the models is precise. The homo economicus theory has a fundamental flaw: a lack of humanity. There's no denying that people place varying values on various things. It's clear to economists that adopting the economic man model as a basis for economic theories is flawed. On the other hand, some people are more ready to give up on the idea than others. It's a well-known fact that people aren't always sensible. Instead of rationality, most people rely on emotions, cognitive biases, and social conventions to influence their decisions.

A second assumption of the economic man theory is that people always make the same choice when faced with a dilemma because they are fully aware of all their possibilities. On the other hand, this isn't always true. When making a decision, one may not have the time to acquire all the information they need to make an informed choice.

Lesson Summary

Homo economicus was coined by the English civil servant, economist, and philosopher John Stuart Mill in an 1836 dissertation on politics. Adam Smith was the first to draw attention to the concept. In an economy, the economic man performs the duties of both a producer and a consumer. An economic man wants to maximize their utility. However, it is as a consumer that the economic man truly shines. Economists can better understand the critical economic notion of utility thanks to the work of the economic man. As a consumer, economists assume that economic man will act in the most rational manner possible to maximize utility. The more accurate the input, the better the model will perform. That is to say, if the input to the models is precise, the economic man can accurately predict how humans will react to a given stimulus. The economic man concept has a fundamental problem: he is devoid of humanity. There's no doubt that people value things differently. The economic man is a fictitious persona created to illustrate typical human behavior and thoughts. Economists expect people to put themselves first and prioritize their own needs over the needs of those around them.