A Critical Review of Homo Economicus from Five Approaches

• Date: 01 January 2019
• Published date: 01 January 2019
• DOI: http://doi.org/10.1111/ajes.12258

A Critical Review of Homo Ec onomicu s from

Five Approaches

By Dante a. Urbina* and alberto rUiz-VillaVerDe†

abstract. Neoclassical economics is based on and structured around

the notion of homo economicus. The theory of consumer choice, the

theory of the firm, industrial organization, and welfare theorems all

require the assumption that agents act in accordance with the scheme

of individualistic rational optimization. In this context, our contribution

is threefold. First, we delimit the notion of homo economicus according

to five characteristics or dimensions. Second, we critically review this

anthropological scheme from five distinct approaches, namely,

behavioral economics, institutional economics, political economy,

economic anthropology, and ecological economics. Third, we

conclude that the scheme of homo economicus is clearly inadequate

and deficient. However, despite its inadequacies, it remains one of the

fundamental pillars of the neoclassical paradigm in economics, which

allows us to discuss why we have not yet overcome this paradigm.

Introduct ion

The notion of homo economicus—a theoretical construct that posits

calculated self-interest as the primary human motive in all transac-

tions—has been under heated discussion for decades among econo-

mists. This discussion has also included scholars from several other

American Jour nal of Economics and Sociology, Vol. 78, No. 1 (Janua ry, 2019).

DOI: 10 .1111/ajes.1225 8

© 2019 American Journa l of Economics and Sociology, Inc

*Assistant professor in the Faculty of Business and Economics at the University of

Lima (Peru). Lectured in Peru, Spain, and Germany. Selected among the best “young

researchers” in a worldwide contest to participate in the Lindau Nobel Laureate Meeting

on Economic Sciences. Published in academic journals of Ukraine and India and is

author of Economía para Herejes: Desnudando los Mitos de la Economía Ortodoxa

[Economics for Heretics: Debunking the Myths of Orthodox Economics] (2015). E-mail:

durbina@ulima.edu.pe

†Associate professor in Political Economy at the University of Granada (Spain). Guest

Editor of this special issue “The Growing Failure of the Neoclassical Paradigm in

Economics.” Head of project PID-16-34: “How to Improve the Way we Teach Economics

in the University: A Critical Approach from the Contents” (2014–2018). E-mail: albertorv@

ugr.es

64 The American Journal of Economics and Sociology

social sciences, such as psychology, sociology, anthropology, history,

and political science. This is not surprising, as neoclassical economics

is based on and structured around the notion of homo economicus.

The theory of consumer choice (utility maximization), the theory of

the firm (profit maximization), industrial organization, the theorems

of welfare, which together comprise practically the entire neoclassical

paradigm in economics, require, directly or indirectly, the assump-

tion that agents act in accordance with the anthropological homo eco-

nomicus scheme. Thus, as is pointed out by Trevor J. Barnes (1988:

477), this notion provides neoclassical economics with a structure:

[It establishes a] methodological agenda [that] reduc[es] the complexity

of economic events at any time or place to the universal tr ait of rational

choice making; a trait that, because of it s determinist nature, is easily rep-

resented in a formal model.

The notion of “economic man” goes back to John Stuart Mill, although

the term itself was introduced by his critics (Ingram 188 8). According

to Mill (1836: 321):

[Economics] does not treat of the whole of man’s nature as modified by

the social state, nor of the whole conduct of man in soc iety. It is con-

cerned with him solely as a being who desire s to possess wealth, and

who is capable of judging the comparative efficacy of mean s for obtaining

that end.

However, it has been argued by Persky (1995) that the anthropological

conception of Mill is not as reductionist as is sometimes thought; on

the contrary, it adapts to various institutional forms and has a wider

range of motivations than the mere desire for wealth, including lei-

sure, luxury and procreation.

The idea of homo economicus1 that has been adopted and inten-

sively used in neoclassical economics is much more specific than in

the writings of Mill. It is this restrictive concept that is more relevant

to review. Once the neoclassical notion of homo economicus is well

defined, a critical review from five approaches can be conducted.2

The intention is not so much an exhaustive record of everything that

has been written about homo economicus. Our aim is rather to select