What Is Homo Economicus?

 FACEBOOK
 TWITTER
 LINKEDIN

By RICHARD C. WILSON
 Updated Aug 25, 2018
Homo economicus, or "economic man," is the characterization of man in some
economic theories as a rational person who pursues wealth for his own self-
interest. The economic man is described as one who avoids unnecessary work
by using rational judgment. The assumption that all humans behave in this
manner has been a fundamental premise for many economic theories.

The history of the term dates back to the 19th century when John Stuart Mill first
proposed the definition of homo economicus. He defined the economic actor as
one "who inevitably does that by which he may obtain the greatest amount of
necessaries, conveniences, and luxuries, with the smallest quantity of labor and
physical self-denial with which they can be obtained."

The idea that man acts in his own self-interest often is attributed to other
economists and philosophers, like economists Adam Smith and David Ricardo,
who considered man to be a rational, self-interested economic agent, and
Aristotle, who discussed man's self-interested tendencies in his work Politics. But
Mill is considered the first to have defined the economic man completely.

The theory of the economic man dominated classical economic thought for many
years until the rise of formal criticism in the 20th century from economic
anthropologists and neo-classical economists. One of the most notable criticisms
can be attributed to famed economist John Maynard Keynes. He, along with
several other economists, argued that humans do not behave like the economic
man. Instead, Keynes asserted that humans behave irrationally. He and his
fellows proposed that the economic man is not a realistic model of human
behavior because economic actors do not always act in their own self-interest
and are not always fully informed when making economic decisions.

Although there have been many critics of the theory of homo economicus, the
idea that economic actors behave in their own self-interest remains a
fundamental basis of economic thought.
What is a rational man?

A man is rational in his actions if they are performed in accordance with some sensible reasons which
make the aim he pursues possible of attainment. Let us clarify our meaning. Any activity possesses a
universal structure: aim – means – result.