"Homo economicus, is a creature of coldly calculated selfishness, dispassionately maximizing its best interests even if that comes at the expense of others."
For the second time today, I get to point out that in economics is neutral about "best interests" and is metaphorically happy to accommodate people whom consider happiness or other such "soft" things as part of their personal value function. If your definition of "homo economicus" is a psycopath... well, you're the one who stuck a psychopath there, so ultimately this is a circular argument in which one asserts that economics is based on the idea of a psychopath that you put there in the first place. Not exactly a surprising result there.
There is absolutely no contradiction between "most people act in what they believe to be their best interests" and "most people take care of their family", because obviously most people consider "taking care of their family" to be in their "best interests".
Homo Economicus is still a fictional being, but it's not because "not everyone is a psychopath", it's because not everyone is perfectly rational all the time, and humans do have some weaknesses on the rationality front. It was (and really is) a good approximation because on the whole, people do act amusingly rationally in a surprising array of situations. (I say "amusing" because they will often act perfectly rationally in some circumstance, then cite as their reason some astonishing bullshit reason. Nevertheless, their actions are often quite rational.)
It's still supposed to be "Homo Economicus" and not "Robo Economicus" or "Vulcan Economicus".
Homo Economicus might be fictional, but Corpo Economicus and Beaureau Econonomicus are not. Whenever individuals must make decisions on behalf of organizations (public or private), they must be able to justify their actions in the rational, sometimes psychopathic, terms of their institution (to make legible decisions, to use Venkatesh Rao's terminology).
Though economics is value-neutral when it comes to what individuals define as their best interests, institutions have their best interests defined quite explicitly, and are often indifferent to any other outcome. Applying the rational actor model to such institutions provides a great deal of cover, if not active encouragement, for maximizing the acquisition of power and resources with little regard for the irrational human processes of morality, responsibility and decency.
Exactly. And where you have a society dominated by entities acting entirely in their self interest you are likely to get instability. Society formed through the complex interplay between selfishness and altruism. An individual in the evolutionary sense is not merely contained within the physical body he inhabits, but is spread among a group of people who share, in part, the genes that describe him. As such the individuals within a genetically related grouping behave at times in a manner beneficial to the common good. This allows the machinations of society to grow in complexity over time. It allows more optimal configurations in the phase space of society to be sought out. Without this interdependence between actors, you fall foul of extreme short termism. We have pure rational self interest on a pedestal and ignored the altruism component for various historical reasons. We find ourselves in a dynamic which is destructive to the pursuit of globally optimal configurations of society.
George Price created a mathematical theory that altruism works with game theory in evolutionary terms. In an attempt to prove the theory either way he adopted increasingly altruistic behaviour and become more religiously devout. He ended up broke having given away all his possessions, becoming depressed due to the number of times he was taken advantage of. He killed himself in 1975. His atheist colleague converted to Christianity.
There are plenty of ways to interpret the models that economists create - if the Price equation can model altruism in terms of game theory, you're perfectly correct that the definition of "best interests" is a variable.
Most people do not take care of their family because they think it's in their best interests. They often take care of their family for myriad reasons--e.g. a moral call to selflessness, sociocultural norms, a sense of familial duty, love, etc. The language of "best interests" really doesn't fit here.
Taking care of an ailing parent is in no way connected to maximizing one's returns on anything (except maybe fulfilling a sense of what you "ought" to do).
You're missing his point. "Interests" is a technical term in economics which means something different from the common usage. In short, it means things you consciously seek for their own value. Love, being moral, fulfilling duties; all of these are interests in the sense economists use the term.
NB: Economists largely study specifically monetary interest because it's something they can measure. A number of criticisms can be made about this, but there isn't a good alternative.
> Economists largely study specifically monetary interest because it's something they can measure.
A principle assumption of many of the models underlying economic theories (including, but not limited to, rational choice theory) is that there is a unidimensional quantity, "utility", that aggregates a persons preferences and which individual decisions increase or decrease by definable amounts. Because money is widely fungible, and utility cannot be measured directly, money (e.g., the money people are willing to pay to get something they want, or the money they demand to do or give up something) is often used as a proxy for utility by economists, with the idea that all decisions have an (potentially zero) utility impact, and that utility impact can be stated in monetary terms.
I'm familiar with utility functions, although I think they don't accurately reflect people's values; I think people's values more closely resemble a poset. But even assuming a cardinal utility function, we run into the problem that money isn't all that widely fungible. I cannot buy friends, family, love, legal or social reform, etc., all of which must weigh heavily in many people's utility functions.
> I cannot buy friends, family, love, legal or social reform, etc., all of which must weigh heavily in many people's utility functions.
The concept is that while you can't do so directly, the degree to which you value these things can in principle be quantified monetarily by the monetary value of the things you can buy with money that you are willing to forego in order to attain the things that cannot be bought with money, allowing money to be used as a tool to quantify utility even for things which it can't buy directly.
I don't think that is consistent with preference being transitive, but I guess that's not a necessary assumption for most economic theory, only that it is cycle-free. If you model my preferences as a directed graph (say an edge A -> B exists if I can and will trade A for B), then in order to be able to use money as a proxy, every node must have a parent and a child which are both amounts of money. This seems unlikely to me.
> I don't think that is consistent with preference being transitive
Its certainly consistent with preference being transitive (since it is intimately tied in with cardinal utility, which is a much stronger position which includes transitive preference.) Transitive preferences in a poset aren't sufficient to support money-as-general-utility-scorecard, however.
Brain fart on my part, I was thinking about a different comment.
I meant that it isn't consistent with people's observed preferences being transitive; if they are, then there is no need to make the inferences you suggest. But of course you were talking about things that can't be traded for money, not things that people refuse to because they value them more, so ignore my criticism.
Actually, that makes me realize that I need to change the edge criterion in my previous comment.
> "Interests" is a technical term in economics which means something different from the common usage. In short, it means things you consciously seek for their own value. Love, being moral, fulfilling duties; all of these are interests in the sense economists use the term.
So what is the "utility" (sorry, I couldn't resist) of this term? It seems to be a tautology - what else could people pursue besides their "interests"? It seems circular - by definition anything people consciously do is an "interest", because humans are rational, because they pursue their interests...
The core significance "rational interests" is that they are consistent. For example, if you like A more than B and B more than C, you should like A more than C. The important part is the internal consistency, not the actual preferences. You could aim at nothing more than helping your fellow man and behave perfectly rationally, as long as you're consistent about it.
It's not a perfect model because people's preferences are not necessarily totally ordered, and people are not always consistent, and preferences change in interesting but sometimes inconsistent (and often predictable) ways. But it's pretty good.
I think it's a great way to think about things because it makes no judgements about what your actual goals are. After all, people have different preferences and interests, and that's fine. More importantly, this also means you could reuse the same ideas perfectly happily for corporations, organizations, societies or event AIs and still draw interesting conclusions. It also lets us create systems that can successfully cater to agents with wildly different interests and get them all to cooperate willingly—that's one of the most important features of our market system and capitalism.
Most of my actions do not achieve goals in themselves. Example: I don't work for its own sake, nor do I work for the sake of money. I work because it is one in a chain of actions I take to satisfy my actual values.
The problem with the concept of "utility" as introduced by economists is that it is commonly used in a bait-and-switch.
You can either use utility as a technical and unassailable term, taking it as axiomatic that humans are utility-maximizers. As a consequence, the term becomes vacuous, because whatever any human does at any point in time, well, it must have been because she or he had some unobservable notion of utility that was maximized by whatever they happened to be doing at the time. So you end up with a "scientific theory" that does not actually allow you to make any predictions, which makes it totally worthless.
Furthermore, facts that seemingly contradict utility-maximization are easily argued away: For example, the fact that humans' behaviour does not appear consistent over time is explained by utility functions change over time.[1]
Once you accept the notion of utility based on this technically unassailable approach to it, however, people have a tendency to subtly shift what they mean by utility, sneaking a hidden value judgement into their argument that might be hard to catch (of course, that value judgement always tends to boil down to: the utility that should be maximized is somewhat equivalent to monetary value). [2]
Yes, there may be a small number of genuinely well-meaning academic economists who do this. However, public discourse has very few well-meaning economists[3], and even fewer academic ones. Given the difficulties of the term, it would be a pragmatic move to eliminate it.
Frankly, I think the main reason that eliminating the notion of utility is so difficult is that eliminating that term leaves a vacuum that is difficult to fill. Explaining human nature is an extremely tough problem, which we are basically unable to solve today. Rather than acknowledge that they are unable to do it, economists worship their variant of the "god of the gaps".
[1] Actually, this is very reminiscent of discussions with people who believe in the existence of a god. Whatever fact one points out that either contradicts or does not fit the existing (non-)evidence well, believers just tend to retreat to a technically unassailable definition of god that ends up making the statement "god exists" pretty vacuous.
[2] Again, this is very reminiscent of discussions with people who believe in the existence of a god. Once one concedes that yes, a god whose existence is so vacuous might well exist, they will at some point switch their definition of god back to one which implies that their god can affect the physical world.
Interests and utility are different concepts. Many economists assume that interests can be modeled by a utility function, assigning a number to interests or at least enforcing an ordering, but there are some who do not. I have a lot of problems with the concept of utility functions, which I've scattered throughout replies to other comments in this tree.
> Most people do not take care of their family because they think it's in their best interests. They often take care of their family for myriad reasons--e.g. a moral call to selflessness, sociocultural norms, a sense of familial duty, love, etc. The language of "best interests" really doesn't fit here.
I disagree, and would almost go so far as to say making other excuses, like following a "moral call to selflessness" or following "sociocultural norms" is more sociopathic.
I value my family, so I'd take care of them if they needed it. No other reason than I value them being around.
Breaking it down and saying, "I need to make it look like I follow sociocultural norms, so I'm going to do this, just to fit in," seems more sociopathic, IMO.
> Taking care of an ailing parent is in no way connected to maximizing one's returns on anything (except maybe fulfilling a sense of what you "ought" to do).
Unless that act teaches your own children how to treat you later in life.
I know it is a semantics argument, but there's a difference between "X ends up acting in alignment with self interest" and "X's actions are motivated/guided by self interest".
Motives aren't really relevant here. Reciprocation or replication by others does happen, regardless of motive, so caring for family and friends (or strangers for that matter) is very much in one's self interest. I took issue only with the idea that it's not.
Exactly. The only assumptions that economics makes about people are that (1) people have different utility functions and (2) that they rationally pursue them. (1) is satisfied even if everybody is perfectly selfless just as much as if they're perfectly selfish, it's only if everybody was a perfect utilitarian that it would break down. (2) is much more tenuous but usually works well enough when you're dealing with large number of people who can try different strategies and adjust their approaches depending on the success of their friends and neighbors.
I think (1) is a tenuous assumption as well, especially in some formalizations. Cardinal utility (the idea that it makes sense to say "I want X lambda times as much as I want Y") is almost certainly bunk. Even assuming a total ordering seems unlikely.
They make a lot more assumptions than that, neoclassical economists at least. How do you think they manage to aggregate the preferences of millions of people to provide "microfoundations" to their models? See the aggregation problem on wikipedia.
economists (particularly of the capitalist variety) certainly have a point of view that the economic utility function can be directly transformed into and represented by monetary value. literally the point of the utility function is to represent behavioral preferences with a number, which can then be calculated on. by turning decisions into math, this transformation has the effect of shielding rational actors from the emotional consequences of their actions.
for example, this is why an interaction with a large (inter-)national bank is often very different from the local credit union. a credit union may give you a break on fees or on check clearing times because they see you standing in front of them in need and they're sympathetic to your situation, but at a major bank, policy decisions are made in private offices far from contact with everyday customers and are simplified into a cold hard calculation about how much profit can be extracted from you.
also i'd posit that not only are humans sometimes not rational, but that humans are commonly irrational. rationality derives from a useful simplification of the world that helped us survive against bigger, faster & stronger animals. we've stretched rationality marvelously to make it a useful model of a wide range of relatively simpler macro-phenomena. but it's a poor model for complex actors like people, who exhibit a much wider degree of freedom and range of action. rationality necessarily assumes that a single best choice can be made in any situation (rarely, two or more choices might be equivalently good but that's not relevant here) and that all relevant factors can be incorporated into that single decision. this is almost never the case in real life, except maybe in the problem sets assigned in school.
it's as likely that a rational model is designed to coincide with the center of a distribution of decisions made by real people, as it is that the model has explanatory power about that distribution. people are incorporating an astonishingly vast array of information in their decision-making that is very unlikely to be considered by a rational economic model, so those "astonishing bullshit reasons" shouldn't be so surprising really if you don't conflate the modeled behavior of the population with that of the individuals.
>"economists (particularly of the capitalist variety) certainly have a point of view that the economic utility function can be directly transformed into and represented by monetary value"
Which economists have that point of view? Some have accused Smith of this, but it is plainly untrue, as made clear in his "Theory of Moral Sentiments".[1] Austrian economists such as Mises (who few would call socialist) criticized even the cardinal utility model, and argued that only lists of ordinal utilities are useful.[2]
The idea that an individual optimizes their trades to maximise utility relative to their initial allocation of resources - and that monetary values in the price system itself therefore reflects an aggregate of human attempts to maximise their utility through trade and production - is so orthodox in economics it doesn't need lists of supporters.
von Mises is unusual in expressing the view that human utility cannot meaningfully be known and understood except through preferences expressed by [economic] action but that's merely a stronger version of the same principle that the price system is a way of linking people's preferences [purely ordinal, in von Mises' case] with a [symbolically cardinal] monetary value.
For the second time today, I get to point out that in economics is neutral about "best interests" and is metaphorically happy to accommodate people whom consider happiness or other such "soft" things as part of their personal value function. If your definition of "homo economicus" is a psycopath... well, you're the one who stuck a psychopath there, so ultimately this is a circular argument in which one asserts that economics is based on the idea of a psychopath that you put there in the first place. Not exactly a surprising result there.
There is absolutely no contradiction between "most people act in what they believe to be their best interests" and "most people take care of their family", because obviously most people consider "taking care of their family" to be in their "best interests".
Homo Economicus is still a fictional being, but it's not because "not everyone is a psychopath", it's because not everyone is perfectly rational all the time, and humans do have some weaknesses on the rationality front. It was (and really is) a good approximation because on the whole, people do act amusingly rationally in a surprising array of situations. (I say "amusing" because they will often act perfectly rationally in some circumstance, then cite as their reason some astonishing bullshit reason. Nevertheless, their actions are often quite rational.)
It's still supposed to be "Homo Economicus" and not "Robo Economicus" or "Vulcan Economicus".