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Homo Economicus

Today I found this idiotic cartooon critizising the concept of Homo Economicus, the rationally deciding human being, that is. (HT @Economists Do It With Models)

I think it’s worth taking a few minutes to explain to my readers why this cartoon got it all wrong. The first two pictures are so stupid I don’t know what to say about them. Obviously, we all don’t do this because it would be too inconvenient and the owner of the shop would probably get angry about us pushing up his electricity bill….

The next two pictures about the kid can be interpreted in several ways. The author probably wanted to imply that economists calculate everything, even the values of lives and love. Well, as far as I know, no economist on this world has come up with a reliable way of calculating either of them. This is probably due to the fact that a Homo Economicus can have both a brain and a heart. Our natural instincts make us do things automatically, like breathing (we don’t calculate the most efficient amount of air for our lungs), eating, loving, and caring for children. Economics mostly don’t account for these things because they are obviously very hard to calculate (if at all), and they are often of inferior importance to economic issues. They exist seperately to the Homo Economicus.

The last picture probably wants to tell us that the Homo Economicus doesn’t care for other people. As a matter of fact, cutting jobs is often going to hurt the competitiveness of companies in the long-run. Thus, they mostly wait to cut jobs until they have no other choice. However, we certainly also have some managers who put their personal interests way above any business or social interest. Welcome to the world, my friend! Yes, many people don’t care for others. And many other people just care for their friends and relatives. The truly altruistic ones are rare. So, yes, if the manager values the artifacts very highly in comparison with his career, then he’s going to cut the jobs by a certain amount. Though this will seldom be the case. In other words, the fact that we don’t observe these things has to do with what I said before, namely that can’t easily trade all things against each other. They are often in economic conflict to each other. This does not invalidate the case of the Homo Economicus!

Just as a reminder, the concept of Homo Economicus is still able to describe actual events in our economy and society very well, if it is correctly applied. Furthermore, there is still no alternative concept available, and I bet that this will still be the case in thirty years from now.

The Homo Economicus is not equal to the Homo Sapiens Sapiens, but he/she is a large, integral part of the Homo Sapiens Sapiens. Get over it!

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