Model of humans as rational, self-interested agents
This article is about the economic concept. For the journal, see Homo Oeconomicus.
The term Homo economicus, or economic man, is the portrayal of humans as agents who are consistently rational and narrowly self-interested, and who pursue their subjectively defined ends optimally. It is a wordplay on Homo sapiens, used in some economic theories and in pedagogy.[1]
In game theory, Homo economicus is often (but not necessarily) modelled through the assumption of perfect rationality. It assumes that agents always act in a way that maximize utility as a consumer and profit as a producer,[2] and are capable of arbitrarily complex deductions towards that end. They will always be capable of thinking through all possible outcomes and choosing that course of action which will result in the best possible result.
The rationality implied in Homo economicus does not restrict what sort of preferences are admissible. Only naive applications of the Homo economicus model assume that agents know what is best for their long-term physical and mental health. For example, an agent's utility function could be linked to the perceived utility of other agents (such as one's husband or children), making Homo economicus compatible with other models such as Homo reciprocans, which emphasizes human cooperation.
As a theory on human conduct, it contrasts to the concepts of behavioral economics, which examines cognitive biases and other irrationalities, and to bounded rationality, which assumes that practical elements such as cognitive and time limitations restrict the rationality of agents.
^Zak, Paul J. (2010-12-16). Moral Markets: The Critical Role of Values in the Economy. Princeton University Press. p. 158. ISBN 9781400837366. Retrieved 22 June 2018.
^Rittenberg and Tregarthen. "Chapter 6" (PDF). Principles of Microeconomics. p. 2. Retrieved June 20, 2012.
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