Homo economicus: cold, calculating & callous
from Asad Zaman
Modern economic theory is founded on the principle that human beings “maximize utility”; that is, they choose the best action from among a collection of choices. This axiom is considered self-evident: why would anyone make an inferior choice, when a better option is available? However, the mathematical formulation of this axiom is far from realistic. After all, it is self-evident that human behavior cannot be described by mathematical laws. Critics have invented the term “homo economicus” to describe behavior governed by economic laws, which differs drastically from normal human behavior. We can describe homo economicus as cold, calculating, and callous. We explain each of these terms separately.
The theory of consumer behavior which is taught in business school differs drastically from the same theory taught in the economics school. The homo economicus of economists is cold – not subject to any emotional influences in his consumption decisions. In complete contrast, a fundamental axiom of consumer theory in the business school is that effective marketing appeals to emotions instead of reason. The proven effectiveness of business school methods in getting consumers to purchase a wide range of completely useless goods shows the superiority of their models of human behavior. read more