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Welcome back you bunch of HomoEconomicus! Today, we will delve into the history and importance of your natural economic selves. Become a true HomoEconomicus by joining the Diegonomics family below!

Classical vs. Behavioral

The HomoEconomicus is simply a term used to describe the ‘economic man’: a rational human being that always aims to maximize its utility (satisfaction). This utility can be maximized in monetary or non-monetary situations. Classical economists have used this ‘rational’ actor, so as to create models and prove theories. However, behavioral economists (like our great friend Daniel Kahneman) and neuroeconomists (like Amos Tversky, a great friend of our main man Dan) have debunked this assumption. Actually, humans on occasion and under certain circumstances actually make “predictably irrational decisions” (Prospect Theory 1979).

The HomoEconomicus

So, does the HomoEconomicus still walk among us? Or was it killed when the behavioral economists crashed into the Earth?

Well… yes and also no. Why? The HomoEconomicus is the foundation for basic economics and so in a sense, it is immune to extinction. Therefore, our ability to understand human economic actions would be impossible without the HomoEconomicus. For instance, one must simplify and generalize at times so as to successfully produce results. In economics one must often assume ceteris paribus: “all other things being equal”, so as to evaluate the potential outcomes of certain actions. Otherwise, we would know nothing! Much like Jon Snow.

On the other hand, this revered discipline is becoming intertwined with: law, neurology, psychology, sociology, anthropology and a bunch of other -ologies. Consequently, the concept of a pure HomoEconomicus is constantly being debated and reformulated. The classical theory will become diluted as more scholars unveil the ‘predictable irrationality’ of the human being as well as what drives it.

The Future of the HomoEconomicus

the blend of the homoeconomicus

It will not become extinct, but its current denomination will very much forge into something entirely new as we expand our knowledge of human consciousness. Currently, humans are described as partly HomoEconomicus and partly HomoEmotionalis (more emotional, social and prone to biases). However, the exact percentage of each is entirely unclear and will continue to spark lively debates for decades to come!

May the ECON be with you