Homo Economicus & Self Interest

Samuel Gregg, of the Acton Institute, writes about the imaginary construct homo economicus:

An “assumption [of modern economics, influenced by Bethamism / Utitilitarianism] is the anthropological model of homo economicus: the human person as the ultimate pleasure calculator.” (Economic Thinking for the Theologically Minded (Lanham, University Press of America, 2001), p.12)

The contrived character of “Homo economicus … utterly without spiritual dimension by design, this creature seeks only to maximise personal satisfaction from the consumption of goods and services.” (p13). He carries out a rational cost-benefit analysis of material self-interest. “In short, he is somewhat of a sociopath.” (p13).

Useful as such an analysis might be, we must not forget its limits. Economics is strictly descriptive and predictive rather than prescriptive. The is-ought fallacy must be avoided (p23-5).

Human behaviour motivation is more complicated than a pure homo economicus analysis might lead us to believe.

“… Adam Smith[‘s] … reflections on self-interest in The Wealth of Nations (1776) should always be placed in the context of his earlier, lesser-known work, The Theory of Moral Sentiments (1759), which speaks of the primary, nonmaterial motivations of justice, benevolence, and prudence, of which desire for honour, respect, social advancement, and wealth are subsets. It should, therefore, come as no surprise that many Christians react negatively to what comes close to being an assertion by some economists that homo economicus is actually the closest approximation of human reality rather than simply an abstract intellectual tool.” (p25)

“Self-interest need not necessarily be equated with selfishness…. Michael Novak reminds us, self-interest is understood as a commonsense duty to oneself.” (p15). Proper self-love is arguably implicitly required by “love your neighbour as yourself” command.

“Christians might rightly object to economists’ speaking on matters of public policy as if the economic calculus were the only legitimate basis for gauging improvements in social welfare, but they go too far when they reject that same calculus as having nothing of value to offer…. The key is recognising that good economics is not synonymous with good public policy. The latter demands attention to a wider set of criteria than the material.” (p27)

“Economic models are similar to maps. Maps provide us with insight into aspects of the truth, they do not, in themselves, capture the whole truth.” (p27) Economics does not tell us where to go nor, on its own, how we ought to get there.