Building humane alternatives to homo economicus
Asad Zaman
Introduction: As discussed in my recent article on self-knowledge as the key to understanding society (see ERA Review, v17, n1) the homo economicus model, central to modern economic theory, is deeply flawed. It assumes that humans are purely self-interested rational agents driven by wealth and pleasure, ignoring the profound influence of social relationships, emotions, and moral values. This collection of articles and papers critiques these flaws and offers alternatives that better reflect the complexity of human behaviour and its societal implications. Exploring these alternatives lays the groundwork for creating new foundations for economics, a key objective of my planned future textbook.
1. Is it Rational to be a Sociopath?
This article critiques the homo economicus model for promoting a sociopathic view of human behaviour, portraying individuals as self-centred and indifferent to societal well-being. This undermines economics’ claim to be a positive science, as it prescribes sociopathic behaviour as rational while ignoring the evidence that humans are naturally cooperative, compassionate, and generous. Research shows that teaching these flawed economic models fosters selfishness and greed in students. Given that most humans are not sociopaths, we must conclude that either humans are irrational or economists are and the evidence strongly suggests the latter. Economists’ irrational standards for rationality and their baseless assumptions about behaviour are at odds with reality.
2. Homo Economicus cold, calculating and callous
Economists persuade students to accept absurd models of human behaviour using two key tricks. First, they shift between contexts: when justifying the model, they frame utility maximization as generic goal-seeking behaviour a trait all humans share. However, in application, this principle is redefined mathematically, embedding unpalatable and unrealistic assumptions. Second, mathematics is used to obscure these assumptions, presenting utility as a function of goods and services consumed without revealing the behavioural constraints implied. This article exposes the concealed assumptions within the mathematics of utility maximization, demonstrating their unrealistic nature and highlighting how they mislead unsuspecting students.
3. Behavioural vs Neoclassical Economics
Behavioural Economics emerged as a discipline when psychologists empirically tested the homo economicus model and found stark deviations from actual human behaviour. In any scientific discipline, such findings would lead to rejecting the flawed axioms and replacing them with theories aligned with observation. However, as Keynes noted long ago, economists remain indifferent to the contradiction between theory and facts. Mainstream textbooks continue to present and justify the failed axioms, while Behavioural Economics is marginalized as a token sub-discipline. Its primary function seems to be deflecting criticism, allowing economists to point to it as evidence of engagement with real behaviour, without addressing the falsehoods entrenched in mainstream theory. This article highlights one of the simplest and starkest contradictions between actual human behaviour and economic assumptions, illustrating the depth of the disconnection.
4. Game Theory for Humans with Hearts
Economists assume that all rational humans behave like Dr. Spock, devoid of emotions. However, experiments reveal that emotions significantly influence human behaviour. This post examines a game where natural emotions strongly shape outcomes and highlights how economists consistently mis-predict these results due to reliance on misleading models. The analysis demonstrates that intuitive under standing of human behaviour yields far more accurate predictions, while economic theory systematically blinds most economists to these realities.
5. Julie Nelson: Poisoning the well
Julie Nelson explores the idea that humans are naturally compassionate, generous, and socially inclined. However, economic theory undermines these tendencies by portraying them as irrational and foolish. This “poisoning of the well” persuades people to suppress their prosocial instincts, promoting harmful behaviours instead. Nelson argues that economic theory is not merely flawed but actively destructive, hindering humanity’s potential to counter harm through natural acts of kindness and cooperation.
6. The Empirical Evidence Against Utility Maximization
A paper by Zaman and Karacuka provides an extensive review of empirical studies demonstrating that utility maximization a core assumption of economic theory is consistently contradicted by realworld behaviour. The breadth of evidence discussed, from ultimatum games to public goods experiments, makes this a cornerstone resource for critiquing the model. Its unique strength is its rigorous, systematic approach to summarizing decades of empirical research.
7. Gratitude, Contentment, and Trust
The idea that science must be positive forced economists to present their normative models of rational behaviour as being positive descriptions of actual behaviour. This has had the natural effect of creating a society built on the sociopathic behaviours praised as rational by economists. Instead of promoting greed and insatiable desires for consumption, we can build much better societies by promoting normative virtues described in the title of this post. Instead of building societies based on greed, competition, and individualism, we could build societies based on generosity, cooperation, and social responsibility.
Conclusion
Since the modelling of human behaviour is the core of modern economics, rejecting it requires rebuilding the entire discipline from the ground up. My forthcoming textbook, Third Generation Islamic Economics, takes up this challenge by presenting a vision for economics rooted in compassion, cooperation, and moral values. By build ing on the ideas discussed here, the textbook aims to offer a transformative approach that aligns economic theory with the realities of human behaviour and the goals of a just and prosperous society.
Source: Real World Econ Rev, 23 Jan 25 https://rwer.wordpress.com/2025/01/23/building-humane-alternatives-to-homo-economicus/
