Learning to be sociable: the evolution of homo economicus.(Homo Economicus)(Report)

I

Introduction

THIS ARTICLE STUDIES THE EVOLUTION of the economic man (Homo economicus) from its original conception by John Stuart Mill and Adam Smith until the current day. By analyzing the discourse of economic articles, we provide a chronological account of economic man's intellectual and philosophical development as it evolved from what we term the philosophical age to the neoclassical age and finally to the strategic age.

The philosophical age saw the formation of Homo economicus and the development of his ideological foundations, including his most enduring axioms of self-interest and rational behavior. As the economic man journeyed into neoclassical economics, he became an analytical tool for the prediction of outcomes and a model for the self-interested utility maximizer operating with finite resources within a society. The neoclassical age also saw spinoffs of the economic man to behavioral, contractual, and social dimensions as criticisms were heaped upon its original concept. Our study discusses the criticisms and shows how, as the economic man enters the strategic age, issues such as social norms, interactive choice, learning, and cooperation take center stage as economists strive for a more robust formulation of Homo economicus.

The article then shows how the discourses in economics are allowing Homo economicus to find convergence with the sociological man (Homo sociologicus) as the former loses its philosophical and ontological assumptions. We survey the literatures of phenomenology, social constructionism, and role theory to illustrate the entity of Homo sociologicus, and examine the fundamental and theoretical issues that arise when attempting to reconcile the two. It is difficult to reconcile the two sapiens because the study of economics views man as atomistic and self-interested, while sociology views man as one whose identity and actions are defined by his role in society. However, game theoretic models provide insights into a possible reconciliation; that is, if the payoffs of economic man's choice are not based on his own preference or his own judgment but are determined by how he is able to predict the collective choice. Then the question of how he devotes his social intelligence to anticipate what the collective choice would be becomes the focus of consideration in maximizing his payoffs. In this case, while the motivation is self-interest, the economic man must become more socially intelligent through learning and understanding the roles of various players in society. Therefore, interactive choice and iterated models of learning and thinking could be viewed as antecedents to role behavior expounded in sociology. The difference between Homo economicus and Homo sociologicus is therefore not about the assumptions of human nature, contrary to popular belief. As we argue here, the evolved Homo economicus in the strategic age does not have any assumptions about human nature--merely that an individual is self-interested--nor has he any overarching philosophical assumptions on what he values. Hence, we claim that an individual can be Homo economicus in terms of his behavior while retaining the ontological assumptions of Homo sociologicus.

II

Literature Review

HOMO ECONOMICUS IS A CORNERSTONE on which economic theories are built, and its concept was thought to be submitted by John Stuart Mill in 1836 (Persky 1995). For Mill, economic man is "solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end" (1995: 321). Mthough Mill pointed out that the central idea of economic man is the link between efficient means and wealth, the meaning of wealth is not merely in attaining material pleasures. Other goals such as accumulation, leisure, luxury, and procreation are also embedded in the pursuit of "wealth" (Persky 1995). Therefore, the economic man is one who judges the comparative efficacy of means to obtain wealth, as well as one who seeks to maximize pleasure. Adam Smith's seminal work (1776) suggested that by merely acting on his own self-interest, he can unintentionally promote public interests. Yet, his freedom of pursuing self-interested gains is not unbounded (Grampp 1948) because a free market can work well only when the divisions of labor and unfettered competition are built on a civilized society (Coase 1976; Kaufman 2002). This is similar in tone to Hobbes's (1947) work insofar as he posited that human nature is self-interested and some people are thought to be "sorely profit pursuing" (1969), which could be taken as an early germ of the Homo economicus (Moss 2002). However, Hobbes's view is different from classical economics in terms of spontaneous social order. In classical economics, social order could be achieved by the "invisible hand." Hobbes felt that sovereign power and punishments are necessary to achieve order and peace.

As economic man journeyed into neoclassical economics, maximizing wealth and pleasure took on the more generic term of maximizing utility, often described as benefits for the individual. Hence, as Mises ([1949] 1996) noted, human action (and therefore economic theory) can only be understood when a prioristic views of human nature (as self-interested) is mapped onto the actions. This is similar to Robbins (1932, 1945). In An Essay on the Nature and Significance of Economic Science, Robbins claimed: "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses" (Robbins 1945:16). He deemed that economic reasoning is a neutral process, which means that economics is about what is rather then what ought to be and that, as a science, economic theory is applicable to various situations depending on the extent to which concepts accurately reflect the actual situation. Robbins therefore makes a case for the kind of deductive methodology that makes economics different from other natural and social sciences.

When such a deductive methodology is employed in economic analysis, the economic man is usually assumed to be perfectly rational. He (the economic man) is able to predict every possible outcome for all his choices, and his decision will be the one that will maximize his utility (Weale 1992; Schneider 1974). Without complications such as personality, value, belief, and emotions, economic man's behavior can be explained by his own self-interested orientation. Other elements such as social norms are akin to rules of the game--economic man maximizes his utility within these rules. In economics, therefore, the definition of the game rules can define the boundary of economic man's behavior, but it does not change the fact that economic man will always be self-interested. Even sacrifice is driven by self-interest. Although some may argue that the concept is unrealistic, it served as a powerful analytical tool in neoclassical economics (Knight 1941).

Economic man is not without his critics, especially when empirical observations of human behavior seem to contradict the predictions (Beckert 1996; Mueller 2004). Some argue that the concept of economic man is too narrow, as self-interest is not the only motivation and people are often driven by social norms as well (Dahrendorf 1968). Others claim that the ability to learn quickly is…