Updated: Aug 1, 2020
How economics modeled man and how man modeled economics.
The newfound Kingdom of Economics squirmed with impatience to be led by a rightful king. Fathered by Adam Smith, the presumptive heir of this Kingdom in the Land of Social Science was anointed by High Minister John Stuart Mill in his 1836 essay, "On the definition of Political Economy and on the method of investigation proper to it". The paragon of rationality, the new emperor was infallible in realizing his self-interest. His raison d’etre? Two passions, “aversion to labour” and the “desire of the present enjoyment of costly indulgences” drove the emperor to fashion means to his -only his- ends. His cult mushroomed at a rate of knots, strongly influenced by the Stoic philosophy of the harmony of the cosmos and Newtonian mechanics to justify the power of self-interest to organise society.
Councilmen David Hume, David Ricardo, Jean-Baptiste Say, Thomas R. Malthus and Jeremy Bentham anachronistically wrote decrees expanding on this system bestowed by the emperor, extolling his unbounded rationality. Vilfredo Pareto and Alfred Marshall personified this rationality with ironclad mathematical interpretations. It seemed that the courtiers thought that they weren't fast enough to mete out bravados on the emperor- delineating his thoughts, his actions, his thoughts on actions and his actions on thoughts. The exports of his worldview were sent to other kingdoms in the Land of Social Science- Business, Political Sciences and Sociology.
His reign was ostensibly going to never end.
All hail the homo economicus.
The corpus of classical economic theory was but a robust monolith, for each theory was inextricably linked to and derived from the other- a cobweb of paradigms with all strands leading to the qualities of his holiness at the center. The models of scarcity, supply, demand, trade and price rested on, rather, relied on his insurmountable rationality. The Homo economicus coda was based on three cardinal tenets: people having rational preferences among outcomes, individuals maximizing utility and profits, and people acting independently on complete information.
Within this cacophony of unabrasive, utility-maximising cotiere grew a seemingly timid wave of dissent. These naysayers frowned upon the god-like image of their emperor, claiming him to be a logical and -more importantly- human improbability. His Invisible Hand, they chided, was tied to his back.
They worked under the shadows enlisting ministers from the Kingdom of Psychology and Neurology for a definitive coup d’etat. Their secretive armory proliferated with theoretical approaches buttressed by a significant body of empirical evidence drawn from laboratory experiments. They gave forth a pioneering analysis of bounded rationality and incorporated cognitive limitations into economic models.
King H. economicus, it seemed, was riddled with the flaws of cognitive bias, misconstrued heretics, reciprocity, inequity aversion and altruism which bounded him from following his own leviathan of isolated rationality. Each of his thoughts were now being dissected to make them conform to the newfound truths, or be consigned to oblivion. The watershed moment for these traitors, who now crowded themselves under the banner of behavioral economics, came in the 1970s when Daniel Kahneman and Amos Tversky carried out the landmark study on nonstandard preferences, grossly sullying the reputation of the emperor.
The Kingdom of Economics faces unprecedented quagmires. Should its ministers reorient themselves to integrate cognitive insights in neoclassical texts? Should a concoction of independently verified decrees of theories guide its path? Would this merit an oligarchical rule of the orthodox cult of H. economicus and the recently strengthened behaviourists to secure the legacy of the land?B=
One thing -if anything- is for certain.
The King, in all his glory, is dead.
By Jasjeev Singh Sahni
Levitt, Steven D., and John A. List. “Homo Economicus Evolves.” Science, vol. 319, no. 5865, 2008, pp. 909–910. JSTOR, www.jstor.org/stable/20053364. Accessed 22 Feb. 2020.
Yamagishi, Toshio, et al. “In Search of Homo Economicus.” Psychological Science, vol. 25, no. 9, 2014, pp. 1699–1711., www.jstor.org/stable/24543905. Accessed 22 Feb. 2020.
SHERMER, MICHAEL. “The Prospects for Homo Economicus.” Scientific American, vol. 297, no. 1, 2007, pp. 40–42. JSTOR, www.jstor.org/stable/26069372. Accessed 22 Feb. 2020.