Assignment Sample on Leadership and Management
Introduction
The “Economic Man” is a term that may be referred to as the “homo economics”, which may be defined as a perfect individual who aims to act rationally by seeking a perfect and ultimate level of knowledge. In a perfect world, the human being is termed as being idealised who strives to achieve the maximum amount of personal utility, which is related to the achievement of the ultimate level of satisfaction. The concept of the “Economic Man” has been in the presence of huge debatable situations, but it has been known to be followed by most of the models of economics.
Main Body
Origin of Economic Man:
It has been witnessed that the main origin of the economic man mainly lies in the essay known for the political economy which was coined by an individual John Stuart Mills in the year 1836. His essay was named “On the definition of Political Economy and on the method of investigation proper to it” mainly tried to assign the basic attributes of the subject under the consideration for a specific new field (Ferber, and Nelson, 2019). It has been stated that the subject of Mill’s theory was “being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end.” The individual had stated in his theory that the aspect of the term political economy has been taken from other motives of human beings, except for those concepts which assist in this hypothetical individual in the ultimate aim of achieving wealth. The main aspect which has been highlighted in this context is luxury. Luxury has been considered as being a desire of the human being which also includes producing offspring. According to Mills, the taste of the economic man is passed on from one generation to the other generation. This means that an individual who has a taste in luxury can produce babies with similar interests.
John Stuart Mill’s- A note on: “On the Definition of Political Economy; and on the Method of Investigation Proper to It”
Mill within his essay, “On the Definition of Political Economy; and on the Method of Investigation Proper to It” from the year 1830, stated that the domain of economy-related to politics is not at all a discipline that can be considered as a part of applied politics. But it can actually be termed as a very short study of man in the abstract desire of all the material gains in the earth (Ferguson and Li, 2018). Mill has not totally rejected the idea that the human world has certain motivations as well as emotions that are outside the pursuit and gain of material well-being. But according to his suggestions, he claimed that those propositions should actually be left out from the study of economics since the study needs to be more logical as well as deductive. The main idea behind the creation of the economic man was to strip off the plain essence of a human being, in order to get to the main truth.
Is the Economic Man forced to act in a responsible manner?
It has been stated before that during this formation, the homo economicus is not forced to act in a moral and responsible manner (Kulikowski, 2017). He is also not manipulated to act in a rational manner also. He is mainly expected to act in a manner that will mainly allow him to attain the preset goals and objectives which should be attained at the lowest cost.
If the situation of a fisherman in the Pacific Ocean is taken, it can be noticed that he will be able to catch the exact amount of fish with his disposable net made out of plastic when compared to a more expensive handwoven net made out of fiber, he would obviously stick to the plastic net because it’s cheaper and economical to him.
Comprehension of the term “Economic Man”
The term “Economic Man” or better known as “homo economicus” mainly relates to the concept of portraying the individuals as agents of being rational on a consistent level. They are barely self-interested and they mainly pursue everything in a subjective manner and aim at their goals optimally (Lin, and Wang, 2017). The term is mainly used in a sense of wordplay on the word “Homo Sapiens”, which are used in some theories related to economics.
The scientists have often made various kinds of models, in order to understand and explain the theory of the “Economic Man”, and in order to build these models, they had to make various kinds of assumptions which had the aim to assist the audience to comprehend the reality in a much more simplified way. The most simplified version of assumption, in the field of economics, is that an individual is fundamentally rational in all kinds of economic or financial situations.
If the game theory is properly analysed, it would mean that the term homo economicus is generally and often modelled and used by the assumption of rationality in a perfect manner (Ma, and Yan, 2018). The main system through which all the agents in the world act is in order to maximise the utility and the satisfaction level of the consumer and also aims at maximising the profit of the producer and as a result, they are mainly arbitrarily capable of certain amounts of complex deductions towards the conclusion of the deal. The agents are always able to think about all the possible outcomes and finally chooses the best course of action which will have the best consequence in the end.
An Economic Man is said to possess one basic kind of difference. Unlike an actual and normal human being, the economic man is expected to behave in a completely rational form in all the scenarios, and thus he has a very minimal level of self-interest. This fact helps him to gradually maximise his or her satisfaction level (Man, Ebadi, Mostafavi, and Surendar, 2019). The various kinds of assumptions are mainly made because the economists have been in favour of studying the consequences of a situation of how a particular market would work if all these economic men will populate the world. For example: In a situation, economists have assumed that the law of supply with its demand can be describable with certain mathematical equations.
The History of Economic Man
The rationality which has been implied on the agents of homo economicus mainly does not restrict the different kinds of preferences and this has been termed to be admissible. It has also been stated that it is the job of certain naive applicants who actually think that all the agents have the accurate knowledge for deciding what is actually best for them and they plan this for their long-term mental as well as physical health (O’Boyle, 2017). It may so happen that the utility function of an agent may be directly or indirectly linked to the utility that is perceived by the other agents, like someone’s children and wife. This makes the homo economicus much more compatible when it is compared to the other models such as the homo reciprocans. The concept of homo reciprocans mainly emphasizes the fact of human cooperation.
The actual idea that homo sapiens are by birth rational creatures and their behaviours can be explainable by the process of mathematics which has its main origination in the European enlightenment of the 18th as well as the 19th century (Papava, 2018). Most of the assumptions that were initially made by the previous thinkers such as Gottfried Wilhelm Leibnitz and René Descartes and in the latter half, it can be seen that the thinkers such as John Stuart Mill and Jeremy Bentham were also the supporters of such ideas.
Models of Economic Man
Homo economicus can be considered as a term that is mainly used for the purpose of approximation and it can also be called a model related to the Homo Sapiens. The agents of Homo Sapiens are considered to act in order to obtain the highest amount of well-being that is possible for either himself or herself in a scenario, where all the possible information about all the given opportunities as well as other constraints are provided (Rangone, 2019). The opportunities and the constraints are both based upon the institutional as well as natural aspects which will be based upon the ability of the agent to achieve the predetermined goals. This approach has been said to be formalised in some of the models related to social sciences mainly in the field of economics.
“Homo Economicus” as a theory of conduct:
When the concept of “Homo Economicus” is taken as a theory of human conduct, it can be noticed that the theory contrasts and differentiates with all the major concepts of behavioural economics. Behavioural economics mainly refers to all the cognitive biases as well as the other kinds of irrationalities as well. Behavioural economics also deals with the concept of bounded rationality which practically assumes all the elements including the concepts related to the cognitive as well time limitations which have the power to restrict the rationality of the agents.
It has been analysed that harnessing the concepts of mathematics especially in the areas of government and politics were introduced in the 19th century (Tripathy, and Das, 2020). Prior to the period of the 19th century, all these subjects were a part of the domain handled by qualitative philosophers. The thinkers such as John Stuart Mill and later on the other economists such as Carl Menger mainly stated that the subject of political economy or economics was a particular discipline for which mathematical rigour had to be followed in all the principles.
Homo Economicus was seen as a “Rational Being”:
Homo Economicus is considered to be a “rational being” which may be taken in the essence that well-being may be defined as the main function of utility which is mainly optimized in the conditions where all perceived opportunities are given. This means that the people mainly pursue to achieve all the specific goals which are predetermined in nature (Vlados, 2020). The individuals may go up to any kind of extent in order to achieve all the goals at the least cost possible. But it must be noted that the term “rationality” mainly does not refer to aspects of both ethical as well as social in the human sense. It is just that humans try their best to achieve these goals at a minimal cost. Hence it is very much innocent for someone to say that the model of homo economicus follows the assumption that the hypothetical individual known as the homo economicus is knowledgeable enough to understand what is actually best for him in the aspects of both mental as well as physical on the long term basis. Hence it can be said that due to this fact, there is no such guarantee that the agent of homo economicus can actually be relied upon to make the appropriate decision for himself.
The Essence of “Homo Economicus”:
The Economic man or better known as the “homo economicus” is mainly a figurative word that is used to narrate a human being which is mainly characterized by the major capacity to make all rational decisions (Wheatcroft, 2018). The main concept behind the economic man is to ascertain the fact that a human being will mainly attempt to maximise the satisfaction for both the monetary as well as the non-monetary gains. Human beings have been termed to have their rationality as an inborn attribute. On the other hand, certain critics such as some modern behaviourists and economists are of the opinion that human beings are not always rational in their decision making and thus stated that a “more human” idea can be used as a more accurate tool for modelling the actual behaviour of humans.
Explaining Homo Economicus by an example:
One of the most common examples of Homo economicus is that of a businessman. The main characteristics of a businessman are to seek profit from each and every transaction as well as decisions made towards his products and his customers (Zhang, Chi, and Luo, 2018). For example, most of the business companies are now automating the process of business and are thus laying off the workers in order to maximise the profit margins thereby reducing the costs and increasing productivity. On the other hand, they might also tend to get completely rid of the non-performing assets of the business in order to focus more on the ones that mainly try to generate more profits for the business.
Criticisms of Economic Man:
The assumptions made for the term homo economicus have been brutally criticized by most economists (Tripathy, and Das, 2020). The criticisms have been displayed on the basis of certain logical statements along with the aspects related to empirical things and also in the spheres of cross-cultural comparisons as well. According to the anthropologists of the Economy, such as Karl Polanyi, Marshall Shalins, Maurice Godelier as well as Marcel Mauss, have explained that in the case of the traditional societies, the choices that are made by the people regarding the aspects of production and also the aspects of exchange of goods, follow the simple pattern of reciprocity. This can be termed as being in sharp contrast with the concepts of homo economicus. This kind of system has been previously termed as the gift to the economy instead of considering the concepts for the market economy. The main criticism lies in the fact that the concept of the economicus model when taken from the aspect of ethical standpoint, refers to the traditional ethic related to the reciprocity of the kinship-based aspect especially when it is held with the traditional societies.
Conclusion
The concept of homo economicus may thus be considered as one of the most complicated and debatable topics in the field of economics. Thus it can be said that the theories of the homo economicus have many deficiencies and need proper verification. Most of the theories based on the homo economicus are not based on any true facts. Hence this concept may not be accepted until and unless the theory is proven. Most economists have termed this theory filled with certain deficiencies. But on the other hand, most of the other economists have also applauded the idea of economic man. But one of the major problems as stated above is that human beings do not always act “rationally”. Hence this can be termed as one of the biggest problems of the theory.
References
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Kulikowski, K., 2017. Do we all agree on how to measure work engagement? Factorial validity of Utrecht Work Engagement Scale as a standard measurement tool–A literature review. Int. J. Occup. Med. Environ. Health, 30, pp.161-175.
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O’Boyle, E.J., 2017. Schumpeter and economic man. International Journal of Social Economics.
Papava, V., 2018. THE ECONOMICS IN CRISIS AND THE MAIN DIRECTIONS FOR TRANSFORMATION OF ECONOMIC SCIENCE. Transformacje.
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Tripathy, S. and Das, S., 2020. Impact of crop diversification on socio-economic life of tribal farmers: A case study from Eastern ghats of India. arXiv preprint arXiv:2011.07326.
Vlados, C., 2020. The growth and development analytical controversies in economic science: A reassessment for the post-Covid-19 era. Journal of Economics and Political Economy, 7(4), pp.209-233.
Wheatcroft, S.G., 2018. The Turn Away from Economic Explanations for Soviet Famines. Contemporary European History, 27(3), pp.465-469.
Zhang, M., Chi, Z. and Luo, J., 2018. Information Economic Man Assumption: Concept Definition and Comparison. Asian Business Research, 3(1), p.41.
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