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How Economics learns from social science and humanities.
Economic theory begins with a fairy tale. Once upon a time, it says, there was the homo economicus. This fabled character from economics 101 textbooks is the self-interested and rationally calculating decision maker. But as anyone who’s ever felt the lure of unhealthy junk food knows all too well, humans just aren’t
Where can we look for answers? One place is the social and human sciences.
From philosophy to law, history to psychology or sociology to political science, all these disciplines have one thing in common: they all try to decipher what makes people do the things they do. Their attempts to get at the heart of the human condition have introduced us to a whole raft of characters to complement homo economicus.
Take psychology’s homo psychologicus.
Far from rational
More interested in acting on impulse
Sacrifices long-term interests for short-term gains
Why do we spend all of our money today, rather than save for a rainy day?
On the other hand, some behaviour is not self-interested. Why do we feel good when we give to charity, even though we don’t expect anything in return?
Sociology adds another character to our expanding cast – homo socialis. What can an economist learn from this figure?
Economies are social systems
Dependent on trust
Information is not always accessible
So we cannot always make informed decisions
We buy things based on recommendations from reviews or trusted individuals
Is it just trust that underpins economies? So, do people do what is best for society because of trust? We know this can’t be true, otherwise there wouldn’t be rules.
It is useful for us to understand another character, homo juridicus, since our behaviour is shaped both by legal and social norms.
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