The Social Context of Homo Economicus

by Marco Ambrosi De la Cadena

London School of Economics

A vast discussion within the field of Philosophy of the Social Sciences is about the explanation of human choice and action. Traditionally, the Homo Economicus and the Homo Sociologicus have been suggested as models of human behaviour. Their differences might be summarised in: a) a distinction between self-interest and collective interest or altruism, b) the motivation to action, in the case of Homo Economicus is self-interest, and for Homo Sociologicus is the conformation to rules and norms. The discussion within Economics about human behaviour has tried to address the question of which model is predominant, or even the ultimate, regarding human desires and actions. One of the answers to this debate is suggested by Pettit (1995) considering the distinction in terms of actuality and virtuality. In this essay I argue that Pettit’s distinction of both models is conditioned by the social context in which the agent’s action is performed. Additionally, the notion of context-dependence of the agent’s action suggests a constant interaction between the behaviour models. Whereby, the discussion about the reduction or opposition of one to another is misleading.

The Homo Economicus has been proposed as a rational instrumental maximizer of expected utility. In Economics, following the Bayesian paradigm, rational choices are seen as correct decisions as long as they maximize the expected utility of the agent. However, many social theorists have tried to apply the economic behaviour to non-economic situations. Hence, the underlying idea is that individuals act in order to attain a benefit for themselves but human choices do not always conform to this pattern. According to this rational model people’s self-regarding desires are stronger than other-regarding desires, determining that people are relatively self-regarding in their desires.

The Homo Economicus model could not be considered as an ultimate explanation of human behaviour. If one analyses the history of economic behaviour, one might find strong economic crises caused by irrational conduct rather than by rational choice processes. Moreover, there is an undeniable tendency in human behaviour towards altruism and cooperation, even in economic decisions. An assertion that humans are entirely selfish would render impossible the explanation of the development of: institutions, norms, roles, rules, and several social aspects based on agreement and cooperation which may be not reducible to individual actions and interests.

Contrary to the Homo Economicus model, Weale (1992) argues for the actual existence of the Homo sociologicus as an agent whose performance is limited by the existence of other individuals and by conformity with rules, norms, roles and institutions. Thus, Weale defines the Homo sociologicus as opposite and irreconcilable with the Homo Economicus. Nevertheless, the Homo sociologicus could not be regarded as an ultimate explanation for human actions either. Any analysis of human behaviour indicates that there is a strong tendency towards individualism and egoism. Despite of the deep connection of the Homo Sociologicus with institutions and others’ interest, the agent ‘faces’ individually the institutions and others’ actions. Consequently, the agent’s reactions and considerations of social aspects is influenced by her context. Furthermore, there could be agents, considered in a Homo Sociologicus ‘sense’ who deliberately and consciously seek to dis-conform with rules or norms in order to achieve their desires, or even there could be agents who might break rules with the intention to reach the social interest.

In an attempt to reconcile both models Pettit (1995) suggests a virtual-actual distinction between them. In this sense, the Homo Economicus not only plays an actual role in market situations but also plays a virtual role in non-economic human choices. Pettit (1995: 314-317) asserts that a self-interested agent (as economists affirm) contradicts the common sense about human action; instead, human action presents a relatively self-regarding agent. Thus, the self-regarding actions are explained as an intervention of the Homo Economicus mind that warns the agent about a possible affection of the self-interest. In ‘normal situations’ the agent proceeds guided by the ‘cultural framing of the situation’ (Pettit, 1995: 319), but when the Homo Economicus’ alarms ‘ring’ the virtuality of economic mind turns out into actuality. Despite being implicit in all situations the economic mind does not explain human actions. For Pettit (1995: 323-327) the economic mind explains the resilience of some human action patterns. At the end, the agent will favour the defence of self-interest rather than the ‘other-regarding interest’ in conflictive situations.

Concerning Pettit’s suggestion one might agree partially with the idea that the economic mind is not always directly present in human action as a result of the context-dependence of the Homo Economicus himself. Emotions, beliefs, culture, ideologies, among other factors, influence economic decisions and desires. Therefore, the Homo Economicus is not entirely rational, it is simply not possible, not naturally human. In the same way, the Homo Economicus could not be conceived as a self-determined individual (actual or virtual), at some point, even the most egoistic agent requires social structures such as: education, governments, laws, or markets in order to accomplish her preferences.

The Homo Economicus might be rational, egoistic and self-regarding but is not an ‘isolated agent’ in her daily life, on the contrary, her rationality, egoism and self-regard take place in a given social context. There is a continuous reference to other people generating -developing- relationships and institutions; even the benefits derived from the rational desires are attained from other agents or social institutions. Human actions, frequently, are not performed regarding the concern or motive of the self. In this way, Pettit acknowledges that the motivation for human choice and action might be influenced by desires of other people.

Thus, the preferences and desires of the Homo Economicus could not be taken as something naturally ‘given’, they are originated within a social context. The Homo Economicus could be considered as a ‘social agent’, and this idea does not affect the argument that she will always favour the self-interest. However, the ‘social side’ of the Homo Economicus (Rankin, 2011) requires her consideration within a context mediated and conditioned by relations, institutions, roles, norms and rules. The rational and egoistic agent cannot deliberately execute her desires ignoring all the social conventions and all the other individuals. At least sometimes, she must conform to norms, rules and roles in order to accomplish her interest. At this point, one could contrast the Homo Economicus with the Homo Sociologicus, and they may be not completely opposite. It could be suggested that the Homo Economicus as a ‘social agent’, as a Homo Sociologicus, is assuming a role, the role of the individualistic Homo Economicus.  

As it was previously mentioned, Homo Economicus cannot be reduced to isolated egoistic behaviour, and Homo Sociologicus cannot be reduced to social collective behaviour. They cannot be reduced to each other, but they are present and interacting between each other. Human agents cannot be understood as mere individuals, nor as mere collective groups. They interact forming or dis-forming collectives, and at the same time, the collectives influenced the individuals, the dependence is mutual and contextual. Consequently, the ‘actuality or virtuality’ of the models of human behaviour is conditioned by the social context in which the actions are performed, e.g. it could be argued that the Western market economies are the best scenario for the Homo Economicus in which her reality is not going to be a virtual one but an actual one. Because the individualistic behaviour, not only in economic terms, is more valuable than a social-collective behaviour. On the other hand, the actual existence of the Homo Sociologicus might be, intuitively, regarded as beneficiary of the context of a non-market economy due to its possible non-individualistic behaviour. Nonetheless, the Homo Sociologicus has an actual reality not only in non-market economies but also (through institutions or agreements) in a market-centred economy despite of its individualist character.

In conclusion, the argument presented is not trying to reconcile nor reduce the Homo Economicus to the Homo Sociologicus, or vice versa, rather it suggests the idea that both are present in economic and non-economic behaviour through desires, social relations, and institutions which are necessary to accomplish the individual and collective interests. The Homo Economicus and the Homo Sociologicus, both considered as ideal models of human behaviour are virtual. Humans are not completely selfish nor altruistic in their actions and desires. The preference of self-regarding desires or other-regarding desires within the agents’ actions are conditioned by a social context which is external to the individual and constructed by social interaction with a constant change.

Bibliography

Levitt, S. & List, J. (2008). Homo economicus Evolves. In: Science. New Series. Vol. 319, No. 5865 (pp. 909-910)

Pettit, P. (1995). The Virtuality of ‘Homo Economicus’. In: Monist. Vol. 78. Issue 3. (pp. 308-329)

Rankin, D. (2011). The Social side of Homo Economicus. In: Trends in Ecology & Evolution. Vol. 26. Issue 1. (pp. 1-3)

Weale, A., (1992). Homo Economicus, Homo Sociologicus. In: Heap, S.H., Hollis, M., Lyons, B., Sugden, R. and Weale, A. The Theory of Choice: A Critical Guide. Oxford: Blackwell. (pp. 62-72).

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