Classical economists have relied on the model of physics to reach predictability, which led them to depict a “rational economic man.” Contemporary studies reveal a very different picture of our economic behavior.
| This post is part of a reading series on Doughnut Economics by Kate Raworth. To quickly access all chapters, please click here. Disclaimer: This chapter summary is personal work and an invitation to read the book itself for a detailed view of all the author’s ideas. |
Early in their search for rationality, classical economists have opted to reduce their quite versatile subject matter—man—to a predictable entity. A series of harsh simplifications were to be made. This is why Stuart Mill (1806-1873) wrote: “[Political economy] does not treat the whole of man’s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end.”1 But is there anything real to “Homo Economicus,” as Mill’s critics dubbed his theoretical creation? Answering this question requires retracing the whole story of our economic self-portrait.
The Story of Our Self-Portrait
Adam Smith (1723-1790), often referred to as the “Father of economics”, famously said in his 1776 book The Wealth of Nations that “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”2 Trade, therefore, was deemed by Adam Smith to be entirely rational. Although he saw self-interest as being “of all virtues that which is most helpful to the individual,” he nevertheless added that our “humanity, justice, generosity and public spirit… (are) the qualities most useful to others.” As a result of this balance in the human psyche between unassailable moral values and self-interested calculations, political economics was to be considered a mere art. At the difference of what appeared as real science, it did not evolve in a thoroughly measurable field.